Here's news of two big apps that have gone free (with ads) in the past week. Boxcar is up first -- the app pushes notifications from any number of social and information services out to your iPhone or iPad, so you can know when you've got a Twitter DM or a Growl notice waiting for you elsewhere. Boxcar (on the App Store) has added support for iPad, and the core functionality is all free. The app comes with ads automatically, or you can pay an in-app purchase of $4.99 to turn them off forever. If you need a lot of quick notices on your iPhone or iPad (and don't want to bother with individual solutions for every app), give it a look.
Byline has made a similar move -- the Google Reader, erm, reader still has its paid version in place, or you can download Byline Free, which offers the same RSS functionality with ads included. I don't see an in-app way to upgrade, but if you try the free version and decide you'd rather support the developer directly, you can buy the full version for $4.99.
This is likely only the beginning of premium paid apps going ad-supported -- with the arrival of iAds in iOS 4, we'll probably see a lot more developers using Apple's advertising solution to supplement their development costs.