YoDude, lol, genius. It seems obvious now, but this is a great business plan. It just pisses me off that now they've figured this out, they have no reason to come back to us. Not at $0.99 anyways.
Google is really poisoning their platform with these ads though, those things drive me nuts, only and idiot would suffer through those to save a dollar. But, if they don't give us a choice, we're all screwed. Meanwhile, the n00bs here are complaining they can't sell themselves out for a dollar. Typical.

Figure that the Android market has a significant portion of teens, especially males. Figure also that such people don't have much pocket money, and the "for free but ad-supported" model makes a lot of sense - If they just charged for it, these teens would go ahead and pirate it.
As it is, some may setup weird proxies and connection-spoofing bits to block the ads, but the majority won't. Especially not if they are online anyway.

Around here, however, most of the people are older and more mature - You had to put up at least $250 if not more to -get- a n900; you couldn't just get it for $50 or less with your parents paying your contract. Around here, we care more about the freedom than we do about getting something free, and an ad-supported version wouldn't really fly, I don't think.
For one thing, setting up an adblocker or spoofer would be trivial on the n900 - all the software's already there. Also, the market's far more fragmented, so finding advertisers that would get their monies worth(and therefor buy ad space) would be hard(er).