Ok here it is. I am a newbie as well. I got an iPhone in China and its the unlocked version. The dude that sold it to me told me not to update it to 3.0. Something with how if i verify it, Apple will lock my phone or something. Can anyone help?
If it isn't a sanzhaiban phone, and it's actually a real iPhone, then you can upgrade to 3.0 Then just use redsn0w or pwnagetool to unlock and jailbreak it.
Most likely it was a locked phone and it was Jailbroken and unlocked through the jailbreak.