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Meaning Of Network/SIM Lock
The process by which a phone is locked to one carrier is called a SIM lock, carrier lock or network lock. It is a built-in technical restriction or limitation that is imposed on the phone at activation. The intention of this limitation is so that mobile phone providers can ensure that the phone may only be used in their network or in certain countries. The phones are locked to only accept a limited number of what are called IMSIs (International Mobile Subscriber Identities) and may restrict the phone to only use one SIM in its service life.
It could either be Factory / Worldwide UNLOCKED or Chip UNLOCKED
This type of unlock means that the iPhone which was previously locked to a network; Sprint, Verizon, AT&T etc. And has been unlocked.
iPhone cannot be factory reset else it would go back to its locked state. If you’re planning on selling your iPhone, just uninstall your main apps, delete your photos & sign out of your iCloud.