iPhone App Store scammers hack accounts, buy their own apps with your money
Some apps take the scam a step further: they sell for free, and then steal your money with in-app purchases (beware of an app called World War). To make sure you haven't been hacked, check your purchase history in iTunes for suspicious activity. As a precaution, it also doesn't hurt to change your account password and remove any saved credit card info. If you've already been scammed, call Apple and your bank and try to stop the purchases from clearing.
If you need more info, TheNextWeb has details on a few of the specific app farms, as well as a good overview of the scam.
UPDATE: Here's a statement from Storm8, one of the companies on TheNextWeb's app farm list.
Looks like there may have been some exaggeration on TheNextWeb's part in this company's case, but it's still a good idea to be careful of in-app purchases. Also, it still seems sketchy to have so many identical apps, just with different point totals (and different prices) attached.Most of our games have been on the App Store for over a year. Our games are free to download and play. Like many apps from iTunes, we offer certain virtual goods (like Honor Points) for sale through In-App Purchase. They are an optional part of the game, and serve to enhance various aspects of user experience and game play. In no case do users have to buy points to use our free applications.