Wil iPhone 3GS work without SIM card?

I am getting ready to upgrade to an iPhone 4.  Someone had told me that after I take my SIM card out of my 3GS that my kids could still play the games we have installed on it.  That it would continue to operate like an iPod Touch. Is this true?

Yep:
http://support.apple.com/kb/HT3406

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