This subject has come up many times and what I posted seems to be the agreed interpretation of the current T&C's.
"You may not use your SIM Card: in, or connected to, any other device including modems; to allow the continuous streaming of any audio / video content, enable Voice over Internet (Voip), P2P or file sharing; or in such a way that adversely impacts the service to other O2 customers."
There's always the chance that myself and others are interpreting this wrongly
Yup, that's been discussed numerous times in these forums, do a search and many many similar topics will come up.
Strange_Visitor's post above summarises the results of all previous arguments and deliberations , however I must say I belong to the minority (or am I the only one?? 😐 ) who believe that particular phrasing of the T&Cs can be interpreted differently and is not entirely rock-solid, etc.
In any case, it's true that for light web browsing and emailing, O2 won't bother you for using your phone as a modem.