Has anyone purchased a SIM phone in Spain from Vodafone. From what I understand, I can get a phone there for around $50, no contract and I just pay as I go by inserting a new card. I'm also told you can change the card and use it in other countries. And, incoming calls from the US are free. True? THanks!

When I was living in Spain I bought a phone from Airtel, which is now Vodafone. I spent about $50-$60 dollars on the phone and it came with minutes already on it. Then I just paid as I went and put minutes on it as needed. You buy a card of minutes and on the back it gives you instructions on how to activate the minutes. I always bought the minutes at Corte Ingles and the sales clerk, knowing I was foreign, would call and activate it for me. No inserting of any additional cards, just activating minutes that you purchase.
Any incoming calls were free anytime, anywhere, as were the text messages from my Spanish friends. Sending the text messages in Spain was pretty cheap. I imagine you can still find this today. This was the cheapest way for me since I was just using it to receive calls and send and receive text messages. I wonder when the US will catch up in cell phones…?
As for using the cell phone in other countries, I used it to receive calls in Western Europe (free of charge!), but I didn’t make any phone calls because I didn’t want to take any chances on fees. Oh, and I didn’t have to change the card to use the phone in the different countries. However, if you want to be able to use the same phone in the US, it has to be “tri-banda” or tri-band in English, or else it won’t work here.
Here is the vodafone website: http://www.vodafone.es/Vodafone/HomeVodafone

¡Suerte!

Thanks for the info - very helpful!

http://www.onspanishtime.com/ also offers phones, once we move I'm planning on buying a twinned SIM cards, 3 cents a min very cheap.

Another option is to use a Skype Phone. The tradeoff is that you have to be at your PC because it is VoIP. I use it to talk to friends of mine in Brazil and Chile. Excellent quality.

http://www.skype.com

Completely free when making Skype to Skype calls (both people have downloaded the free software). Skype makes money by charging for Skype In and Skype Out minutes. Skype In means people can call your cell phone for example (i.e. you have a New York cell phone that anyone can call) and the calls gets routed to your Skype phone no matter what country you are in. Skype Out means you can call any landline in the world for a fee. I highly recommend buying a headset or skype phone because the quality is excellent (much better than your PC's built in mic and stereo). I use the Motorola 500 Blue Tooth Earpiece. Rocks. I bought the CIT 200 from Linksys, but had an issue with the battery.

I love skype. Talked to my buddy in South Korea yesterday. Perfect! They were bought by eBay for like $2.2 billion.