O2 has
posted prices for their Pay & Go service. The new iPhone 3G costs £299.99 and 16GB for £359.99 for Pay & Go service which does not require a long term contract. This price includes unlimited browsing and Wi-Fi for the first 6 months after you activate your iPhone, but does require a £10/month plan to continue after that time.
The £299.99 price is much lower than the prices that has been previously rumored for unsubsidized iPhone. For reference, the original iPhone was priced at £269 and required an 18 month contract.
Update: O2 has removed pricing from their website.
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