Refreshed internals, lower price point possible.
Apple Now Selling Contract-Free iPhone in Retail Stores?
Apple's offer comes with fewer restrictions than AT&T's, as Apple retail stores are apparently not limiting sales to one per customer and are not requiring that purchasers be current AT&T customers.
While the phones are still technically locked to AT&T service, it is possible (but not supported) to unlock the phones for use with other mobile service providers. In the US, that is largely limited to T-Moble and Metro PCS, although both GSM providers do not support the 3G network the iPhone 3G needs to connect at faster than EDGE speeds.