They dont actually buy your contract, as zip said, they work out exactly how much you would pay until the end of the contact, for eg, 8 months x £35 per month = £280 and give you it as cashback.
It is then up to you whether you pay off your contract in full, or leave it run and pay the £35 a month until the end.
£400-£500 commission is not uncommon for high end tariffs and if you only wanted a cheap handset you could get a big cashback amount. Different shops will want to make different profits, its all about how much you can get from the assistant on the day.
Some places offer instant cashback, others you have to claim over a period of time.
Hope that helps.