Smartphones like the Apple iPhone act like both ordinary cell phones and computers within the same device. You can make calls and you can also surf the Internet. This is because the iPhone essentially has two processors; the operating system (or OS) that processes Internet and mobile functions and the baseband that operates as a cell phone's antenna would.
The iPhone's baseband manages functions that would ordinarily require an antenna. This includes receiving and placing phone calls and picking up the signal from cell phone towers. The baseband also operates the Wi-Fi and Bluetooth capabilities of the iPhone.
Whenever Apple updates the baseband firmware, it is done separately from the OS's firmware updates because both are individual components of the iPhone. These updates are installed automatically whenever you perform a soft reset; that is, when you turn your phone off and then on again.
This is the code that runs the iPhone's baseband; it verifies the baseband's signature and uploads any new baseband firmware updates. The bootloader should not be confused with the baseband itself.
Hacking and Jailbreaking
If you choose to hack or jailbreak your iPhone, you must hack both the OS and the baseband firmware. If you only modify the OS and leave the baseband firmware un-hacked, you will not be able to make and receive phone calls on the device.