What is a SIM card
A SIM card is a tiny plastic card, about the size of a postage stamp, that slides into the back of a GSM mobile (or "cell") phone.
SIM cards are sold (or, in some cases, given away) by mobile phone operators, and they contain the intelligence that allows your phone to be used on any given network.
Often when you purchase a discounted mobile phone from a retailer, it will be sold to you with a "SIM lock." This means that it can only be used with the SIM card of the mobile phone operator you're initially purchasing service with (the reasoning here is that you get the phone at a discount in return for a long-term commitment, making it hard to "jump ship" to a competitor). It's usual trivial, especially outside of North America, to have a SIM lock removed (usually called "unlocking" and sometimes bundled with "debranding," which removes the proprietary graphics of the original operator); I had this done overnight in Ljubljana for 12 EUR in 2003.
Some SIM cards are so-called "global" SIM cards, in that they can be used, usually with much higher rates, on multiple networks around the world.
All of this only applies to GSM mobile phones -- many phones sold in North America by companies like Bell Canada, Aliant, Telus, and Verizon use a different technology (CDMA in most cases) and don't use SIM cards.