Firmware

Firmware is something in-between "hardware" and "software" - hence the name "firmware".

Hardware, in high-tech devices like phones, is any part of the phone that is physical and cannot be changed unless physically replaced. For example, Verizon phones are CDMA, while VoiceStream phones are GSM. The two systems are incompatible. The Verizon phone contains a CDMA chip that was designed specifically to deal with CDMA. It is permanently wired that way, and could never be changed to GSM with any kind of upgrade.

Software, meanwhile, refers to things that can be changed. In a computer, you can of course load new software whenever you want. You can even load a whole new operating system. The software is stored on in memory chips while in use, but as soon as the computer is turned off, whatever was in the memory chips is gone, but a copy is saved on the hard disk.

Phones need to store various non-permanent things, too, such as an operating system, roaming instructions, and your phone book. But there is no room for a disk of any kind, and it wouldn't be good if your phone lost its operating system (and thus became useless) every time you turned it off.

Which is where firmware comes in. Firmware uses special memory chips that can hold information even when the phone is turned off and battery-less. It's sort of like hardware, because it acts just like a permanently-wired chip, but it's also like software because it can be changed at any time.

So firmware is technically how your phone stores its phone book, but when most people here talk about firmware, they are talking about the roaming instructions (PRL) or operating system.

You can have your PRL updated and your phone will be able to roam in new areas. Sometimes operating system updates are available that fix bugs in the way the phone works. Sometimes updates even add new features, such as ERI or 2-way text messaging. These are all firmware updates.