It’s precisely because SIM only deals don’t include a phone that they’re usually a lot cheaper than standard mobile phone monthly contracts.
A SIM card itself is a microchip around the size of a postage stamp holding all of a mobile phone’s configuration information, for example the mobile phone number and call plan. Without a SIM card, a mobile phone will not work.
Once a SIM card has been activated it is permanently locked to the particular network, though not locked to a particular phone. That means you can easily change mobile phone handsets but keep your phone number, your friends’ phone numbers and any saved messages or photos.