iOS jailbreaking is the process of removing limitations on iOS, Apple's operating system on devices running it through the use of software and hardware exploits; such devices include the iPhone, iPod touch, iPad, and second-generation Apple TV. Jailbreaking permits root access to the iOS file system and manager, allowing the download of additional applications, extensions, and themes that are unavailable through the official Apple App Store. Jailbreaking is a form of privilege escalation, and the term has been used to describe privilege escalation on devices by other manufacturers as well. The name refers to breaking the device out of its "jail", which is a technical term used in Unix-style systems, for example in the term "  FreeBSD jail". A jailbroken iPhone, iPod touch, or iPad running iOS can still use the App Store, iTunes, and other normal functions, such as making telephone calls.

NO, What exactly jailbreak is you can read it from above. Now iam discussing about the unlocking the iphone. Several wireless carriers around the world, but most commonly in the United States, subsidize the cost of a new iPhone to consumers by binding them to a contract to use the services of the carrier, usually for 2 years. This allows a new phone to be purchased for only $200 instead of its regular "no-contract" retail price of about $45.

These iPhones are "locked" to only work on the telecom network of that specific wireless carrier. Unlocking is the process of removing this restriction and freeing up the phone to be used with any wireless network. Depending upon the model of the iPhone, there may be restrictions even after unlocking because phones that support only CDMA cannot be used on a GSM network. Unlocking allows the consumer to use a different wireless service without being forced to change her phone.

USE OF  THIRD PATY APPS :-  

One of the reasons for jailbreaking is to expand the feature set limited by Apple and its App Store.dubious – discuss] Apple checks apps for compliance with its iOS Developer Program License Agreement before accepting them for distribution in the App Store. However, their reasons for banning apps are not limited to safety and security and may be construed as arbitrary and capricious. As the list of banned apps continues to grow, users rely on jailbreaking to circumvent Apple's censorship of content and features. Jailbreaking permits the downloading of programs not approved by Apple, such as customization apps used to change the User Interface.Since software programs available through Cydia are not required to adhere to App Store guidelines, many of them are not typical self-contained apps but instead are extensions and customizations for iOS and other apps. Users install these programs for purposes including personalization and customization of the interface, adding desired features and fixing annoyances, and making development work on the device easier by providing access to the filesystem and command-line tools. Many Chinese iPhone owners jailbreak their phones to install third-party Chinese character input systems because they are easier to use than Apple's.

Early exploit fixes:- 

On July 15, 2011, Apple released a new version of iOS that closed the exploit used in JailbreakMe 3.0. The German Federal Office for Information Security had reported that the "critical weakness" uncovered by JailbreakMe meant that iOS users could potentially have their information stolen or unwillingly downloaded malware by clicking on maliciously crafted PDF files. Before Apple released a fix for this security hole, jailbreak users had access to a fix published by the developer of JailbreakMe

Device customization:-

HOW TO JAILBREAK IOS 7:-