Phones with chips?

My co-worker just signed up with T-Mobile. He said he got a Samsung (? Or
Sanyo). The phone has all the ESN, Phone book, etc. programmed in a chip
smaller than an SD card. He has a friend who has a Moto V300 just sitting
in the closet. His friend said, here, try this out. My co-worker removed
the chip from his brand new T-Mobile phone and installed it in the V300. It
works there.

Why does Verizon have this kind of technology?

Any pros and cons?