Ah, finally. Apple has announced developers can now implement in-app purchases for free applications. This is a massive change in policy for Apple and over the course of the next few months could potentially restructure the entire application economy.
Since the launch of the application store, there's been a massive problem for every application (especially games): there are no demos or trial versions. Developers came up with own solution to the problem with the ever-popular "lite" (and free) version of applications, which essentially doubled the amount of content on the application store unnecessarily and created more work for applications interested in making money.
I've always balked at paying $9.99 for the Beejive instant messaging application for the iPhone and there's no "lite" version. I understand Beejive's argument. They don't want to offer a demo version that could possibly be just enough for what I want from the application, stopping me from ultimately buying the full-featured application. Now, however, Beejive can offer a limited demo version for free and provide me with incentives within the application itself to upgrade. This is a powerful tool for games.
It'll take time for developers to upgrade existing applications and it's possible this will be a movement better embraced by new applications, but it was a move Apple should have made ages ago.