The App Store that launched wasn't really built for application distribution -- it was built to deliver DRM controlled media files to iPods. Apple decided to extend the iTunes Music Store and enable it to deliver applications to the iPhone OS devices. While this short-cut probably got the App Store launched faster, it's apparent that it wasn't designed for application delivery. This short-cut has made life difficult for developers. Those developers have started to find ways around some of these restrictions though.
One of the main ways that shareware developers get new users is through downloading of demo versions of their software. The App Store doesn't directly provide a method for developers to distribute demo versions of their software and Apple reportedly has some pretty strict rules on crippled / demo software.
Apple will not allow, according to some developers, software with features disabled or limited in any way. Applications can not present greyed-out options or pop-up messages noting that the selected feature is only available in the full version. Both common methods used in demo software. Even though in a few cases these restrictions have gotten past Apple, most notable in Twitterific, there are multiple reports of applications being rejected for doing this.
So if developers want to release some sort of demo version of their application, and the App Store is the only way they can release ANY application for the iPhone, they have to abide by the rules that Apple has laid down. A few developers have gone to the trouble to release demo versions -- those demo versions have sometimes shot to near the top of the free applications list. Most are going without demo versions for now.
Over time, Apple will most likely add the ability to deliver demo versions of the applications, much as they have with iPod games. But when they will do this is unknown (don't hold your breath).