While cool, it seems odd they would suddenly do this. Apple seemed adamant that Flash was a drain on battery life, and they went out of their way to get YouTube to recode all their videos to not be Flash.
So why suddenly add Flash now? Why not have it there all along?
Something doesn't seem right with this rumor -- unless they're just caving in to all the complaints of the iPhone not supporting Flash. But Apple doesn't seem like the kind of company to cave in...
I think Apple was playing a game of chicken with Adobe over the flash player licensing fee. Adobe wants a pretty penny for the player on embedded devices.
[Dramatic reenactment]
ADOBE: So, you want the flash player on your new phone, eh?
STEVE: Yep.
ADOBE: OK, that'll be 5% of retail sales.
STEVE: Ah, no
ADOBE: OK, 2.5%, bottom line.
STEVE: Look, we can release this device without the Flash player at all.
ADOBE: No way, we rule dynamic content on the web--if you want to give people the "real web" you've got to play ball.
STEVE [to the public]: Develop using Web 2.0, Flash Player will suck your battery so it's really better that you don't have FP. [applies RDF effect].
PUBLIC: [Buys 100,000 x ? phones in the first week]
ADOBE: Ah, Steve? Steve? Are you there?
STEVE: Hmm, oh it's you. Can I help you with something?
ADOBE: Ah, how's about 5$/unit.
STEVE [Applying RDF]:
you think it would be strategic to offer the Flash Player for free on the iPhone.
ADOBE: Ah... We've decided it would be strategic to offer the player for free on iPhones... [blinks a few times, regains focus] But you've got to pay for the development and maintenance.
STEVE: Already done.