Previously Apple restricted the application development for iPod, iPhone & iPad and excluded a number of technologies like Unity, Titanium, MonoTouch, and Flash CS5, but no limited to these.

See the following articles that explains the limitations:
http://www.zdnet.com/blog/apple/apple-puts-another-nail-into-flashs-coffin/6554
http://www.mikechambers.com/blog/2010/04/20/on-adobe-flash-cs5-and-iphone-applications/

As a result to this restrictions Adobe has stopped the development for the iPhone.

Apple implied about Adobe…

They are lazy. They have all this potential to do interesting things, but they just refuse to do it. They don’t do anything with the approaches that Apple is taking, like Carbon. Apple does not support Flash because it is so buggy. Whenever a Mac crashes more often than not it’s because of Flash. No one will be using Flash. The world is moving to HTML5.

But Adobe demonstrated the opposite that Flash Player 10 is suitable and ready for mobile market by working closely with Google to integrate Flash Player 10 with Android OS and this way enabling the release of the Motorola Droid 2 mobile phone with Flash Player 10 (see the printed ad here).

Today, 9th of September, Apple did relaxed the App Store Review Guidelines allowing third party development tools. The things that changes are:

3.3.1 Applications may only use Documented APIs in the manner prescribed by Apple and must not use or call any private APIs.

3.3.2 An Application may not download or install executable code. Interpreted code may only be used in an Application if all scripts, code and interpreters are packaged in the Application and not downloaded. The only exception to the foregoing is scripts and code downloaded and run by Apple’s built-in WebKit framework.

With these changes, in my opinion, Apple admits that they did a mistake and now they are trying to fix it. Apple’s problem is that Android Market is gaining in App Store’s detriment and lots of developers started developing applications for Android using third party tools. As a result to this Adobe’s shares did explode today.

Let’s wait for Adobe’s response to Apple’s move.

Further readings:
http://www.ft.com/cms/s/2/86cf0890-bc32-11df-8c02-00144feab49a.html?referrer_id=yahoofinance&ft_ref=yahoo1&segid=03058
http://m.zdnet.com/blog/apple/app-store-review-guidelines-published-third-party-dev-tools-allowed/8131