It means that you have to pay full price for your new phone so that means that you don’t have to restart a new contract. So let’s see a new iPhone 11 cost 1500, then you will pay $1,500 for the phone so you don't sign a new 2 year contract.
Re: upgrade new phone would extend the contract period?
the point of people signing a contract is to avoid paying the full price of the handset and subsidizing it so you pay a lower upfront fee for the expensive handset and commit to using it for 2 years. but also remember, these handsets are expensive not cheap so be careful with it and try not to break it or damage it, cus once your locked in a contract, a replacement phone will cost you the full outright price not a subsidized price you got a discount on