I thinking of upgrading my 4 year old Samsung J700 to a smartphone, but don't really use phones enough to want to take out a contract, so want to stay on PAYG. I haven't really kept an eye on the phone market over the past few years so I don't know a huge amount about how smartphones work compared to my Samsung J700 (which was pretty much just calls, SMS, MP3 ringtones and a 1.3 MP camera)

My question is how does connecting to the internet work if you don't have a contract? I assume you need to be paying someone for the internet access (when i'm not inside a wifi hotspot that is).

Will the phone automatically connect to wifi hotspot as a priority instead of using a 3G internet connection?

You have to pay someone if you want to connect via 3G. This can be on a payg or 30 day rollover.
If you have wifi turned on, it will prioritise this over 3G, but unless you connect to wifi network, your 3G will kick in.
Wifi won't turn itself on automatically if you are on the move, so you need to ensure that your connections are controlled manually if you want to avoid stiff charges.

Thanks for the answers.
What is a 30 day rollover? Can you look for available networks before being connected to any networks at all?

My bro is on Tesco mobile Pay As You Go, £10 topup = £20 free credit so thats £30 in total and he has a 500mb internet bundle for £5 a month. so topup £10 a month and automatically get £25 credit and 500mb internet. works great for him (iPhone 4S)

30 day rollover means you sign up for a month on a use it or lose it basis. There's no commitment to stay any longer.
Your phone can search for networks, but it's best to have a contract with them otherwise you will get caned for roaming charges.
Best to look at maps for your area to see which provider had the best service , as coverage varies.

A 30 day contract is similiar to a regular contract except that you are not tied into a long contract. You might have a 30 cancellation period and it will cost more then a long contract.

As previous poster said, check reception in the areas where you will be on 3G (e.g. work). And there are lot of resellers like giffgaff, virgin media, tesco, etc who use other peoples network.

You will also need to get yourself a phone that is either on the network you are interested in or that is network unlocked. Used smart phones start at around £50 for something like San Francisco to hundreds of pounds for the latest phones. The more you pay then generally they are quicker, bigger better screens, better cameras, more features, etc. Should also warn you that battery life won't be as good as your current phone and once you start using GPS and bluetooth, etc then it could be as short as hours. On my mrs HTC Desire, with GPS and 3G we used google maps on the 3 hour journey and that was enough to take it from fully charged to just about empty, need to remember to put it on the car charger next time, lol.

You also need to think about how much data allowance you need. If you are not doing any video or music streaming and just checking e-mail, facebook, etc then even 150mb might be enough. Once you start doing things like music streaming then you might need 500mb and with video you may need to look for 1gb or unlimited. With rolling contract you should be able to move up tiers if you need to.

I bought a smartphone sim free , like you i don't really use my phone much as a actual phone, so i signed up for giffgagg, for which i get unlimited internet for £10.00 a month, which means i can listen to my favorite rock radio stations from america every day, when i'm skiving at work.

Just want to say thanks for all the advice.