The iTunes iApplication Delivery Package
Well, I've finally had a good look at the iTunes way of delivering iPod touch and iPhone applications. The iPod touch upgrade package arrived as a package using the ipa extension and is stored in a "Mobile Applications" folder. Like many Apple bundles, the ipa package is in fact a zipped archive which you can easily unzip and examine.
Inside, I found a package manifest and the deliverable. The manifest was in human readable form, the actual "product" (which is nothing other than a simple text properly list that enables the iPod touch features, already installed during the 1.1.3 upgrade) is encrypted. There is a sinf that accompanies the product and a p7b that supports the manifest. Both of these use encryption technology to protect the integrity of the manifest and to limit access to the deliverable.
These details are extremely similar to way iTunes currently ships its iPod games and ensure that whenever third party applications begin shipping that they won't be easily pirated.
Thanks everyone who tipped us off about this