I would only ever recommend a pay monthy phone. You get a new phone and can change the contract every 18 months (which is a surprisingly short length of time!)
PAYG means having to top up a certain amount at a certain time every month to get a special deal etc. Cant be doing with it - im the least organised person under the sun.
AFAIK, the iphone is only on O2, I am with O2 and find them to be very friendly and helpful (as well as their call centre being just round the corner from my house).
Pop down to your local O2 store, they will have an iphone to play with and they will be able to explain the tarrifs. They do have the facility to sell you the online tarrifs instore, they can call up for you and do it (they pass the phone to you for your authorisation etc)
When the contract is up for renewal, if you find your current tarrif isnt for you, and you have run up some big bills, they will try to better the deal (i got £10 off / month, free home broadband, new phone etc).
I would not recommend any 3rd party resellers such as CPW, P4U etc. I went through CPW/o2 once, and they had my number on calling lists. Being young and naive at the time, i ended up with two insurance policies on the same phone. On asking CPW to remove my number from said lists, they told me i had to write to their head office.

I still got calls from CPW though, to "check that everythings ok". WTF? No it isnt ok, you keep ringing me when im trying to work and have a LIFE! Leave me alone! If everything isnt ok, I'll let you know!
