Hmm… the crux (or should I say, economics?) seems to be this:
“The future of app monetization clearly lies in ad-supported model. A recent study by Cambridge University computer scientists found that 73% of apps in the Android marketplace were free, and of those, 80% relied on advertising as their main business model. Free apps are also far more popular in terms of downloads, the researchers said. Just 20% of paid apps are downloaded more than 100 times and only 0.2% of paid apps are downloaded more than 10,000 times. On the flipside, 20% of free apps get 10,000 or more downloads.”
That pretty much sums up what happens in the android marketplace.