The story was originally broken by Daring Fireball here. And has been commented on and expanded at the following sites. All three posts are awesome and I recommend you read each.
- Has Steve Jobs Gone Mad - Why Does Everything Suck Blog
- Why Apple Did it - Daring Fireball
- Steve Jobs Responds to Adobe - Mashable
In my mind Apple has a point. They are trying to provide a simple, stable device with consistent interfaces. Nontechie's do not care if the platform is open or closed. Regular folks don't care about multitasking. They just want their phone to work all the time. PCs crash, phones don't. By tightly controlling design and development, Apple can meet their stability and design goals.
Google Android provides the open alternative to Apple's approach. Right now it is messier and probably not as good. But it is open, and that allows developers to iterate and improve. Over time, it seems possible that it will match or surpass its closed adversary.
Developers, customers, and the market will determine which approach is best. It is going to be an interesting fight.