A pre-paid plan is when you add money to your phone first, which you can then use to make calls and text. The company charges you a fixed amount for each call and text, and you can use the phone until the money runs out. Once the money runs out, you go to the store and add more money (if you like to pay cash) or call customer service and add money (if you use a credit card).
For example, when I go to the States I immediately go to AT&T. I pay 50$ and get a pre-paid SIM card and about 40$ credit on my phone, ready to use (the first time you sign up you have to pay for the SIM card, which is 10$ or so- I cant remember exactly).
So now I have 40$ on my phone to use how I want. For example, I usually get the 1000 text plan for $10, or the unlimited text plan for 15$ (they expire every 30 days). You can also buy minutes for phone calls. After that, I can use the phone until my credit runs out. Once it runs out, I reload it with cash, and so on and so forth.
If you're planning on staying long-term, it might be best to pay for the unlimited talking/texting plan, which runs about 60$ for one month I believe. Anyway, there's a bunch of options but the great thing is that it's a la carte & theres no contract. The important thing is that you MUST bring your own, unlocked phone. Because they might get you with the phone fees if you're an international and make you pay a deposit. But if you have your own phone, you should be fine.
EDIT: I hope this is clear enough. I'm in the middle of wine hour so .... I'll check it in the morning.