If I sell my Moto Droid can anyone buy it and activate it even tho I am still under contract? Would the phone be free and clear for whoever buys it?
Yes, anyone will be able to activate it. Just make sure you either disconnect the line it's on or activate a different phone in it's place.
and how can the person activate the phone into their contract?
they'll have to have a data plan or i don't believe verizon will let them activate it. if they have the $29.99 plan (or are willing to add it) then you should be able to just go into the store and have them active it. if the phone will be disconnected and you have no past due balances or any other issues with vzn (and i'm assuming it's not stolen or been reported as lost), then you can advertise it as a moto droid with a "clean esn." this will let buyers know that they'll have no problems activating it. i think you can even get the esn # (either off the phone or from zvn) so a potetial buyer can verify with verizon that it's clean.
But somebody is going to have to finish paying for the phone if it's not already paid for.