Basically Flash poses a number of problems for Apple and Adobe reportedly hasn't been all that corporative over the past three years at doing what Apple wants. So, I think rather than keep fighting and getting lambasted for not having Flash (even though no one else has either) I think they just said screw it lets focus on the future rather than shoe horning Flash into mobile.
I don't disagree, here is my take on the "flash controversy".
If we look back a few years, everyone was using flash on their computers and life was just fine. Then a very small, and innocuous cold war broke out between Apple and Adobe. This preceded the meteoric rise of the smartphone. It was political as is typical of many small controversies. It simmered for quite some time while Jobs and his counterpart at Adobe, had their disagreements. I truly believe this conflict is so old that only a very few insiders even know how it got started. Anyway, it did and it escalated, and yet it was not covered in the press at that point. Slowly Apple spread the word that flash was the problem behind the slow downs noticed when running it on Apples computers. Then when Apple migrated to the Intel processor, they ramped up the campaign to kill flash. I believe at that point, it would have been very wise for Apple to simply buy Adobe. From a technical standpoint I understand flash, and I know what the problems are. They are easily resolved, but not in a "cold war" environment. A battle of egos prevent any progress. Heels dug in... everyone loses.
Fast forward to today. Apple wants total control, as they always have had. Building both the hardware and software as they have for many years, they are used to total control and as long as this flash war continues, they don't have it. However as we all know Apple is on a roll, they are wildly successful from a monetary standpoint, and that is what makes them so powerful. So powerful, they've recently convinced the public that any internet site that uses flash is not "iPad ready". What a crock. Only Apple could pull that off.
At the end of the day, it would be great to see the flash controversy go away, as Jobs will never back down, he has to be right at all costs.