The baseband is what the previous poster said, the radio your iPhone uses. Basically it's better to have a lower baseband because the lower the number, the earlier they came out (usually), which means that an unlock is more likely to have been developed for the lower basebands. However, not much progress has been made on an unlock that depends on the baseband in a long time, and with the availability of unlocked iPhone models in the USA directly at Apple stores, the focus on baseband unlocking has become a bit less of a big deal.
