What does it mean when an iPhone is unlocked versus when it unbricked ? Thanks

Unlocked is very clearly defined, this means removing the restriction to only use the iPhone with the carrier it was sold locked to. For example using an AT&T iPhone with t-mobile requires unlocking. Unlocking on the 3G and 3GS can either be done permanently by Apple (if your carrier/contract supports this) or temporarily via software unlocks like ultrasn0w, yellowsn0w. For the 2G, the iPhone devteam have developed a tool called bootneuter which permanently unlocks 2G iphones.

Unbricking is a less well defined term. Generally bricking a phone is placing it into an inoperable state. Essentially it is no better than a brick. Depending on how the phone was bricked it might be possible to fix it. Thus the term unbricked.

In the very early days of the iPhone 2G, a few of the unlocking and activation tools could end up software-bricking the iPhone.

Nowdays, partly due to the lack of ability to control the baseband at the lowest levels but mostly due to more experience with hacking the iPhone, it is pretty much impossible to software brick an iPhone 3G or 3GS.

It is still all too easy to upgrade the baseband to a version that can't be software unlocked, but I would not call that bricking.