Significance

• Whether your iPhone is simply out of range of a cell tower or is not connected to a cellular service at all, its features, except for calling and text messaging, are still available -- in essence, it will perform exactly the same way as an iPod Touch does. This means that if you purchase a newer model iPhone, you can still use your old iPhone as an iPod Touch for additional music storage.
  
  

Activation

• To use an iPhone, you must first activate it within iTunes, a process that requires a valid SIM card and a cellular account. Prior to activation, the iPhone has virtually no functionality beyond making emergency calls. Once the activation process is complete, cellular service is not required to use an iPhone like an iPod.
  
  

SIM Cards

• In iPhone models 3G and later, you can remove an inactive SIM card and use the device as an iPod Touch. For earlier models of the iPhone, however, the SIM card must be left in place -- even if it is currently inactive. If you don't have a SIM card for your original iPhone, you'll need to contact your cellular provider for a replacement if you want to use the device as an iPod Touch. The device will not be functional without one.
  
  

Wi-Fi

• Without cell service, you won't have access to a 3G network for Web browsing, email and downloading iTunes purchases. You can perform all of these functions over a Wi-Fi network, however. When Wi-Fi is enabled in the Settings menu of your iPhone, you can access the Internet on your iPhone -- just as you'd be able to on an iPod Touch.