To my understanding you buy the iPhone for $599 or whatever the price is and its like a prepaid plan. You pay every month and if you skip a month they turn your phone off, you can cancel anytime without getting a fee.
From the Verizon Wireless Site:
How Prepaid Monthly Plans Work:
Make sure your Monthly Access is paid in full before the renewal date to get your monthly minutes. You can make additional payments any time.
If you use all your minutes during the month, you can pay for extra minutes or texts with any leftover balance.
As long as there's enough in your account to cover your Monthly Access, your minutes will renew on the same date every month.
You can make payments using a credit, debit or Refill Card or by signing up for Auto Pay.
Payment expirations (once applied to the account):
$15 - $29.99 = 30 days
$30 - $74.99 = 90 days
$75 - $99.99 = 180 days
$100 or more = 365 days