AdMob is one of the bigger names in iPhone ad-supported applications. They provide embeddable advertisements that developers can incorporate into otherwise free apps. Recently, third-party ad networks like AdWhirl and Tapjoy have appeared on the scene, offering to negotiate ad displays from multiple sources to increase developer revenues and increase fill rates. Yesterday, citing increased technical complaints and parameter obstruction, AdMob announced that it would no longer work with these third party mediation services.
This move affects developers who turned to dynamic advertisement solutions from third parties. AdMob will continue to allow developers to use their own solutions for maximizing ad fill rates outside these services.
Ad-supported applications are not particularly common in the App Store, where they have been relatively unsuccessful as a monetizing solution (jailbreak apps on Cydia and Icy have provided somewhat more effective results). App Store titles must compete in a huge market with delays in providing updates. The relatively close relationship between software creators and their target audience and quick update/release cycles appears to work better with ad-supported models than the more formal App Store environment.
Further details about the AdMob policy change can be found on their blog.