The OS is written so that the phone uses the fastest connection available. For most of us, that will mean WiFi first, then 3G, then EDGE, then GPRS.
If you are within range (~100 feet or so) of a WiFi access point, the phone will automatically choose that data method, as long as it's either an open network, or you've provided the password to it already. Keep in mind that some public WiFi networks (like Starbucks, St. Louis Bread Co./Panera Bread, Borders, most Airports, etc.) require a web-based login once your device connects to the network. The login page pops up automatically when you try to navigate your browser somewhere.
As for powering off radios, my understanding is this: You can have all radios on, or you have the option of turning OFF WiFi, 3G, or both. The EDGE radio is built into the GSM chip...if you power one off, they both go. I could go into more detail regarding how GSM radios contain 3 data channels (voice, data, ping), but we'll save that for later.
Long story short, if you live in a 3G network area, make sure you're actually away from WiFi enough to justify leaving the radio turned on...even having the radio on drains battery, so if you're using WiFi a lot, it may be beneficial to turn 3G off. If you
don't live within 3G coverage, TURN IT OFF! There's no point in having the phone ping the tower every 3 minutes to see if faster internet coverage is available...it's just not.
Lastly, there's Airplane Mode...that just turns off ALL radios...and we all know there's only one good place for that. On my nightstand while I'm sleepin'.
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