This is what you see when you go to buy an iPhone from Apple these days and pay full price:
If you choose "Connect to a carrier now" you will get an unlocked phone but it has an eSIM. It will also be "activated"; when that happens the eSIM is enabled and the old SIM card is disabled. Carriers charge a fee for activation. For AT&T it's $30.
So in this cases you pay $1,100 for the iPhone and there's a hidden fee of $30 from AT&T if you go the eSIM route. (I suspect if you switch a phone from SIM to eSIM you will also be charged $30.)
Sometimes Apple may choose to list the "Connect to a carrier now" with a "carrier discount" of $30. In this case they'll display the cost of the phone with the discount applied; the "Connect on your own later" will be $30 more. But if you choose the cheaper option you will get charged the $30 from your carrier. So Apple is .... lying about the price. Apple probably gets a kickback from the carrier,
Just choose "Connect on your own later" and pay the real price up front.
Update 9/11/2022: For a semester in Italy we converted my daughter's physical SIM to an eSIM using the iOS convert to eSIM feature. Our next bill will tell us if there was a fee associated with the conversion.