There was never any particularly clear reason that Apple wasn't allowing free games and apps to make use of the important micro-transaction feature added to the 3.0 software, but that restriction has now been lifted.
Available immediately, developers can now release free games and applications and make use of in-game purchases and micro-transactions. This apparently includes free and lite versions; allowing players to unlock the full game from within the free version, and reducing clutter on the App Store since devs will only have to release a single product.
Apple also pointed out - quite rightly - that this system will also help to reduce the massive amounts of piracy the iPhone is suffering, as the game's owner will be able to verify the app's authenticity during the micro-transaction.
Already ngmoco - which recently gave a talk on the depth of piracy its games are suffering - announced that its highly anticipated online shooter Eliminate will be free to play, sol clearly developers are excited about this turn of events.
It's not without its complications as Jon explains over on PocketGamer.Biz (such as how those vital, gold-spinning free and paid charts will now work on the App Store), but once developers get a handle on this new revenue model, we'll likely be seeing another shift in the iPhone's fortunes.