Mediatek has been making processors in phones for a while. Before Android they used the very lightweight Nucleus OS. This was functional, but not ideal - often the English language implementation wasn't exactly up to par. Since the MT6516 chip was released in 2010, low end China devices have switched to offering Android almost exclusively. For many years I have been following and buying all kinds of devices like this from China, right from my first 'SCiPhone' in 2007. I find it fascinating discovering how functional such super low cost devices can be.
These devices are enormously popular in China and India, with brands like Lenovo, Zopo and THL being more widespread than many western focused brands and even Apple's juggernaut. These devices used to be shunned. The first generation of the Mediatek-based Android phones were severely underpowered. That has changed in the last 18 months with the newer processors having high clock speeds and multiple cores, so much so that OEMs like Acer and ZTE are starting to use them. These devices are moving out of the shadows in the lower tier and becoming very competitively priced mid tier options.
A big distinction when buying these types of phones is Clones versus Branded. Clones mimic the design of other mainstream phones with varying levels of success. They are rarely exact copies, often being thicker and heavier than the genuine counterpart. The build quality also can be sketchy, with bodies made out of brittle plastic that can easily crack and parts glued together rather than screwed or clipped.
It's not uncommon for reported benchmarks and specifications to be falsified. Cloned, unbranded phones can come with benchmark apps that are modified to give false results with highly exaggerated reports of clock speeds and memory amounts being common. Even Android itself can be hacked to show different build numbers, last time I checked Google didn't release Android 4.0.9 but I've seen many devices claiming to run it. These things can make it very difficult to know what's under the hood of a brandless clone when buying from a seller on a site such as Aliexpress.
Branded phones offer a better experience. Not only do they have better build quality but it's also far easier to get support and its more likely that updates and bug fixes will be available. There still can be issues. The most common I have encountered is an intermittent WiFi signal - a pain if you want to remain connected for long periods. Nearly every phone will come with some added Chinese apps. These are normally rather simple to remove or disable, but you can get the odd stubborn one. Finding and flashing a clean firmware is normally the best option.
The Android implementation is fairly standard across all devices powered by Mediatek. Some phones do have customized launchers and lock screens, but it's not common. Based on my experience, these phones come loaded with Google apps. Some don't; some devices come loaded with Chinese alternatives for the Play Store, but it's relatively simple to get Google services up and running. It is common for these phones to have "Incompatible Device" problems with certain apps. This can normally be fixed by rooting the phone and modifying the build.prop file to mimic that of another phone. The dual sim card functionality is the same in all devices and operates just like the Acer Liquid Gallant Duo. Just remember, it's dual standby - you can't have two active phone calls going at once. These phones can also have annoying partition layouts. Generally the internal ROM size is normally 2 to 4 GB. It's common for these devices to be designed for full functionality without an SD card. This is done by allocating some of the internal flash to a virtual SD card. It can be useful, but it does cut down on the space available in Internal Storage for applications.
Newer devices include a 'System Update' app that lets you load ROM's from a zip file without going into recovery or flashing over USB. Failing this there is the 'Smart Phone Flash Tool' made by Mediatek that lets you write a new firmware directly over USB.
My current phone a Zopo ZP900s/9300+, the current CIDotW here at MoDaCo. The big feature here is the glorious 5.3", qHD screen. Shopping around you should be able to pick up the model with 1GB of RAM for under £150. If you want something smaller I'd look out for the JiaYu G2, it's a 4" phone with a very nice 8MB camera and a stunning screen - this screen is one of the best I've seen on any phone. There is the G2+ model running the dual core MT6577, but I have yet to have a hands on with it.
But it might be worthwhile to wait. Mediatek has announced the next generation of phone processors with the flagship being the quad-core, 28nm, 1gHz MT6589. While there is no official release date for devices, fabrication for these chips is said to be starting in late October. Beyond this there are plans for a eight-core behemoth in early 2013. Just like every other piece of technology, the ultimate things are always just around the corner.
Beyond these choices the best thing I can recommend is to do research. Look around on forums (use Google Translate - Chinese and Russian boards can be a fountain of information) to see what people say about each device. Most brands host very active bulletin boards on their official websites. Hopefully in the future the boards here at MoDaCo will host a thriving community based on these devices.