The baseband is the software which runs the modem in your phone. It therefore controls voice and data traffic with your chosen carrier. It is only important to jailbreakers where you have purchased a locked phone on contract, say with AT&T or O2, and want to use it with another carrier.
Only old basebands can be unlocked using software (ultrasn0w) since to unlock them relies on finding an exploit, just like jailbreaking does. There have not been any new exploits found in a very long time.
More recently, Gevey released a hardware SIM tray unlock solution which could work with the previous iPhone4 baseband (04.10.01).
With the release of IOS5, Apple updated the baseband on iPhone4 specifically to block Gevey sims and now there is no unlock solution for them either.
The baseband of the phone can never be downgraded, therefore anyone who needed an unlock but installed the latest stock IOS has rendered their phone locked again. What they should have done is install a custom firmware which did not include the baseband component, thus preserving their current baseband and their unlock.
There is also no way to currently unlock the iPhone4S baseband, but I guess that doesn't matter to you since you would not have purchased one if you needed it to be unlocked.
