"You can use it as a WiFi Hotspot" means that you can use the phone to broadcast a WiFi signal for nearby computers/devices to use to access the Internet.
The phone acts as a WiFi access point, using the cellular network to relay the devices connected to it to the Internet.
Yeah, this is ok, but how does this iPhone behave differently than the usual here? Do the other phones (when acting as hotspot) keep broadcasting the WiFi signal when receiving data over the cellular network?
It's a limitation to CDMA, so if the same feature were allowed by AT&T you wouldn't have a service interruption due to voice usage (GSM can do voice and data simultaneously).
This is basically what is called "tethering", using the 3G internet connection of the phone for other devices (such as your laptop), except that the "tether" is no a physical connection but just a wifi connection. In other words, you put your phone into this mode and you can connect to it through wifi and have wireless internet anywhere you have 3G coverage. AT&T does not offer the same service.
Of course, it's worth noting that tethering isn't a "service" that carriers have to build or support. It's an inherent capability of a sufficiently advanced computing device that has access to two networks simultaneously. But in a textbook case of non-neutrality, AT&T (and others) prevent you from using that capability unless you pay them to remove the entirely artificial restriction.
Quite so. AT&T restricts your ability to tether, because there are still unlimited data plans and they don't want people to fully take advantage of those plans.
The phone acts as a WiFi access point, using the cellular network to relay the devices connected to it to the Internet.