It appears that Apple has relaxed their rules on iPhone apps developed with Flash.  You still can’t run the apps in Mobile Safari, but it looks like apps made with the CS5  iPhone packager are now OK.

The Wall Street Journal has the news.

So what does this mean for you?  Well, it looks like you could start creating some optimized Flash games, export them with CS5 with your iPhone developer key, submit them to itunes, and then get just as frustrated as you do now when no one buys them! (just kidding…kind of).

(thanks to horseman from the forums)