It's a sad day, but the company doesn't seem like it's going anywhere, at least not yet. Who knows if they'll keep making new apps or simply only support the ones they've already got out. I hope we hear more from Andrew Welch in the coming days.
As for why this happened, so much of their business (historically) was in publishing. With stuff like the App Store, they faced some pretty steep competition, and I think a lot of third party developers no longer needed Ambrosia's support for delivering games and handling payments. Instead in recent years they've been focused on in-house development, specifically utilities, and while they're widely used they're not particularly sexy. Enthusiasm for the company has been waning, compared to the days of all those great games people keep mentioning. In the good old days, a new piece of software could be announced and they'd be guaranteed to have a lot of interest from the community built around their games. Lately, they've been having to compete on a more equal level against hundreds of other developers, just to get the word out.
They seem to be a casualty of the success of Apple's App Store, or the Mac as a whole. They used to be one of the biggest Mac software companies around, but now they're just one out of so many others.
