Locked devices are those which can work only with one wireless service provider. If you are using a TracFone, this means you will only be able to operate their Sim card.
This takes away the freedom of changing networks from the customers since if they want to, they have to get a new device which often seems an unpopular notion.
An unlocked phone on the other hand is a device that can work with all other network service provider Sim cards as well. All you need to do is get a new SIM card and insert it.
Earlier, phones used to be locked, but now after the FCC Rulings, unlockable phones have become mandatory. Companies cannot provide locked phones to their customers. This does not mean your phone will not be locked.
This means you can get it unlocked after one year and use any other SIM card of your choice.