*An iPhone can be purchased at full price without a contract. To be used within the United States, the aforementioned iPhone must then be put on a plan that is a contract or by using T-Mobile. Side effects may include lack of Visual Voicemail, 3G, and less coverage. Terms and conditions still apply.
1) There are other brands of phone available in the US market besides the iPhone.
2) You can put a non-contract iPhone on the AT&T network without a contract using a go phone SIM. This can be done by jailbreaking and unlocking a US iPhone, or by getting a sim for an unlocked foreign iPhone. I don't believe you will get visual voicemail ( I have not checked) but the coverage and data speeds are the same as with a contract.
3) You can put the non-contract phone on AT&T with a post paid PLAN with no two year commitments or CONTRACT. You pay the same per months as the 2 year contract, but you can cancell at anytime without penalty.
The key point is like the US, MOST other countries do have contracts and locked phones. The terms of how long the contract is and if and when you can get the phone unlocked vary country to country. Also the popularity (and pricing differences) of contracts verses prepay varies, but most places I have been have both options, just like the US.