The contract free iPhones are the unlocked phones. They are unlocked so you are not stuck with the contract of the telco you originally bought it with.
As the seller of iPhones, Apple can sell you one outright/contract free/unlocked, or they can sell you one that is locked to AT&T or Verizon, hence why contract free iPhones are expensive on eBay, as the buyer can then choose which telco they want to go with. They are not required to then pay the monthly fee of what ever the telco charges, and instead can choose to go on a pre-paid sim card for as little as $5 a month in some case.
I believe that's just to clarify to the buyer that it is an AT&T iPhone as there are slight differences between the AT&T model and the Verizon models.[/QUOTE
contract free is not as same as unlocked
Iphones selling on Ebay are contract free but still locked to AT&T and still selling for $450. So this means that you wouldnt be in a 2 year contract but as they r locked to AT&T, you will have to get AT&T as your carrier and still pay the same bill each month.