As people have said, all carriers sell phones with a contract or "off contract" price. Most Smart phones that At&t sells right now can be FREE from resellers like Wal-Mart, Wirefly, Amazon with contract and then around $500 without a contract. The Dell Streak is sold from Dell Direct for $399 w/o contract now and you may get some of the older phones cheaper.
The At&t Smart Phone ETF is currently $325 if you cancel prior to 2 years with a deduction in fee of $10 for every month you keep it.
They have a 30 day return policy. I kept my Sony X10 for 29 days before I returned it to Amazon and got my Dell Streak for $99 from Best Buy 3 days later. I have had the Streak now for 21 days and plan to keep it. When you return it, it has to be in original packaging, no damage, etc. Some resellers also have additional limits on how many minutes you used it etc.
At&t also has an early Upgrade fee, which they don't advertise at all, it was $75 after 6 months, not sure what it is now.