This morning, my Apps runneth-ed over. This afternoon, after a brutal once-over, not so much. I just deleted over a hundred applications from my iTunes library, and storage-wise, my iOS devices are breathing a little easier for it. To delete an app in iTunes, you can select one in Apps, press the Delete key and click Remove when a dialog appears asking if you are sure you want to remove the app from your iTunes library (you can also right-click an app and choose Delete). Then you should get a dialog asking if you'd like to keep the file or move it to the trash. I keep these files so that they no longer appear in iTunes, because apps tend to be tiny and I've got plenty of storage. You can always trash them, however, and get them back via Time Machine -- provided that you back up your machine regularly. Another neat trick is going into your iTunes account and checking your purchase history, although this can take a while to load and isn't searchable or sortable.
As a blogger for TUAW, I collect a lot more paid apps than most people. But contrary to what you might think, it wasn't the review apps that were clogging up my app collection. I'm actually pretty good about testing, writing-up (or giving feedback about why I'm not writing-up) and then tossing promo-code apps. The apps that were clogging up iTunes were the "Lite" ones. All those demo items that I decided to give a try just to see if I wanted to go for the whole shebang or not.
I truly wish iTunes had a "Delete all lite apps" option, because it took a while to sort through those guys, figure out what I had (and had not) tested, and what I had (and had not) upgraded. I had more cruft than I remember downloading (I think I'm going to blame my kids for that) and quite a few that we had already bought in their "pro" or "full" versions. You can, of course, search your apps for "free" and "lite" words, but you will have to remember which ones you bought as full versions.