Walt Mossberg answers this question for us.
But the iPhone has a major drawback: the cellphone network it uses. It only works with AT&T (formerly Cingular), wonâ€™t come in models that use Verizon or Sprint and canâ€™t use the digital cards (called SIM cards) that would allow it to run on T-Mobileâ€™s network. So, the phone can be a poor choice unless you are in areas where AT&Tâ€™s coverage is good. It does work overseas, but only via an AT&T roaming plan. [source]
Here is another obstacle for potential subscribers:
For example, once the phone goes on sale this Friday, you wonâ€™t sign up for service in a phone store, under pressure from the sales staff. You will be able to peruse and choose a plan at your leisure, in the iTunes software on your computer. [source]
As you can see, activating your phone plan is done via iTunes, which may require you to have an iTunes account. Application is not done through your telco outlet.
If you had an iPhone shipped here, it will turn heads, it will make you the center of attention, but at the end of the day, it will make you look like a jackass, having spent $499 for a phone that doesn’t work. You can use it
as an iPod and Skype phone though. It was not however clear if Walt was saying that the phone comes with a locked SIM card slot (hackable) or an integrated SIM card slot (hardware hackable most likely). You will need to sign up for AT&T services to get the iPod features working.
Trivia: GSM phones that use SIM cards produce those weird static noises you hear when your phone is receiving data close to a microphone or radio. CDMA phones are silent.