In a surprising reversal, Apple announced a game changer for it app developers. According to an e-mail sent to developers, Apple will now allow in-app purchases for free apps. The move allows App Store developers to adopt a true “freemium” business model, wherein customers can download an app and pay for additional functionality.

An e-mail to developers stated that, “using In App Purchase in your app can also help combat some of the problems of software piracy by allowing you to verify In App Purchases.”

Developer blogs this morning were all abuzz with the announcement. A post on the iPhone Blog explains the significance of the announcement in this way: “So in one email, Apple ends the clutter of Lite apps, provides a real possibility for demoware (a developer can provide 1 level of a game, for example, for free, and 10 more via in-app purchase), and offers developers the carrot of anti-piracy measures at the same time.”

Until now, developers had been forced to charge a minimum of 99 cents for their application if they wanted to implement “micro transactions,” such as requiring users to pay for additional levels of a game. In-app purchases essentially give developers the ability to up-sell their customers.