In a somewhat-unexpected-yet-not-entirely-surprising turn of events, Apple announced to developers today that in-app purchases are available to free applications.
At WWDC this year, Scott Forstall defended restricting In App Purchases to paid applications (costing a minimum of 99¢).
…to keep it simple, when a consumer sees a free application, free apps remain free. You won’t be asked ever to buy something inside that free application.
Because of that, developers who wanted to offer free, feature-limited lite versions of their applications had to publish it and the full version as separate apps, and some previously-free apps, including the hugely-successful Tap Tap Revenge, gained 99¢ price tags to support add-ons unlocked through In App Purchase.
All that’s missing now are paid updates.