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A SIM lock, simlock, network lock, carrier lock or (master) subsidy lock is a technical restriction built into GSM and CDMA mobile phones by mobile phone manufacturers for use by service providers to restrict the use of these phones to specific countries and/or networks. This is in contrast to a phone (retrospectively called SIM-free or unlocked) that does not impose any SIM restrictions.
Generally phones can be locked to accept only SIM cards with certain International Mobile Subscriber Identities (IMSIs); IMSIs may be restricted by:

Mobile country code (MCC; e.g., will only work with SIM issued in one country)
Mobile network code (MNC; e.g., AT&T Mobility, T-Mobile, Vodafone, Bell Mobility etc.)
Mobile subscriber identification number (MSIN; i.e., only one SIM can be used with the phone)
Additionally, some phones, especially Nokia phones, are locked by group IDs (GIDs), restricting them to a single Mobile virtual network operator (MVNO) of a certain operator.
Most mobile phones can be unlocked to work with any GSM network provider, but the phone may still display the original branding and may not support features of the new carrier. Besides the locking, phones may also have firmware installed on them which is specific to the network provider. For example, a Vodafone or Telstra branded phone in Australia will display the relevant logo and may only support features provided by that network (e.g. Vodafone Live!). This firmware is installed by the service provider and is separate from the locking mechanism. Most phones can be unbranded by reflashing a different firmware version, a procedure recommended for advanced users only. The reason many network providers SIM lock their phones is that they offer phones at a discount to customers in exchange for a contract to pay for the use of the network for a specified time period, usually between one and three years. This business model allows the company to recoup the cost of the phone over the life of the contract. Such discounts are worth up to several hundred US dollars. If the phones were not locked, users might sign a contract with one company, get the discounted phone, then stop paying the monthly bill (thus breaking the contract) and start using the phone on another network or even sell the phone for a profit. SIM locking curbs this by prohibiting change of network (using a new SIM).
In some countries, SIM locking is very common if subsidized phones are sold with prepaid contracts. It is important to note, however, that the technology associated with the phone must be compatible with the technology being used by the network carrier. A GSM cell phone will only work with a GSM carrier and will not work on a CDMA network provider. Likewise, a CDMA cell phone will only work with a CDMA carrier and will not work on a GSM network provider. Note that newer (2013+) high end mobile phones are capable of supporting both CDMA and GSM technologies, allowing customers to use their mobile devices on any network. Examples of these mobile devices are the Apple iPhone 5c, 6 and newer, Motorola’s G4, G5, X Pure, Samsung’s Galaxy S6, S7, S8 smart phones, mostly phones based on a Qualcomm Snapdragon chipset or radio.
In some jurisdictions, such as Canada, Chile, China, Israel, and Singapore, it is illegal for providers to sell SIM locked devices. In other countries, carriers may not be required to unlock devices or may require the consumer to pay a fee for unlocking.
Unlocking the phone, however, is almost universally legal. Additionally, it is often legal for carriers to force SIM locks for certain amounts of time, varying by region.