Still not 'free'
The price paid for iOS is spread out from the time you buy the first iOS device until the time you leave the Apple ecosystem. Any time you buy an app, see an ad, or purchase something from iTunes you are paying a little bit towards the development of iOS. Apple devices are merely a vehicle for content where Apple gets to wet their beak. I'm not saying this is a bad mechanism...continuing to be able to get money for ever advancing apps requires Apple to constantly advance their OS, which allows developers to write applications with more features.
If you look at the new WP7 app market, it looks like Microsoft is picking up (ok, full-on copying) this model. They will get a cut of the sales for apps, the Zune store is a pretty nice way to find new media, and in return Microsoft says that, like iOS, the WP7 will be updated regularly, for free, and in a way that limits the delay in carrier distribution.