Apple has just sent out a letter to developers introducing in-app purchasing for free apps.
ORIGINAL: Here's what Apple had to say:
In App Purchase is being rapidly adopted by developers in their paid apps. Now you can use In App Purchase in your free apps to sell content, subscriptions, and digital services.
You can also simplify your development by creating a single version of your app that uses In App Purchase to unlock additional functionality, eliminating the need to create Lite versions of your app. Using In App Purchase in your app can also help combat some of the problems of software piracy by allowing you to verify In App Purchases.
Visit the App Store Resource Center for more details about how you can add In App Purchases to your free apps.
So in one email, Apple ends the clutter of Lite apps, provides a real possibility for demoware (a developer can provide 1 level of a game, for example, for free, and 10 more via in-app purchase), and offers developers the carrot of anti-piracy measures at the same time.
Previously, Apple was resolute about "free apps stay free" so as to avoid user confusion. What changed their mind, all of the above? And will in-app purchases in free apps be extra-carefully marked to avoid just such confusion?
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