Wow. Although this was largely expected, it still feels weird to realize that Apple is going to be deeply involved in advertising. And, it's actually hard to describe their position - I think it is selling advertising space (but, because it is Apple and the tight control that comes along with it), advertising services, and the medium itself. It is like Panasonic manufacturing the television, owning some (but not all) of the channels, having control over a certain type of channel (those that opt into iAd), helping create/approve the advertising, etc. It's a very global system and very much shuts google out of advertising on apps that go the iAd route. And, if built very neatly into the SDK, will be hard to resist simply opting into iAd as a default for occasional developers. Google will really need to create a drop-in ad system for apps that goes beyond display ads.
Separately, it never occurred to me until two seconds ago with Google's auto-complete, that the "App Store" is two letters away from the "Apple Store".