I find it odd that so many people are willing to defend advertisements that directly profit Apple, but not any other form of advertisement. Let's be honest, has anyone heard people rally against firewalls, Flash and ad blockers for web browsers, or DVRs for cable? Nope. I don't really care how clever, well designed and interactive an ad is, it's still an ad. Regardless if it is an iAd, a Flash ad, an HTML 5 ad, an animated gif banner, a plain image or some other format. There are plenty of Flash ads on the web that are just as well designed and interactive as iAds, and they annoy myself and many others the same amount.
The excuse for developers that ads help support their free app is a lame one. If the developer doesn't want to give away their hard work for free, then don't release a "free" version. Duh. There is the option to charge money for apps after all. Use it. If developers are trying to get their app noticed with a free version, then release it as a lite version with limited functionality. Finally, for those developers that can't seem to get people to download their app unless they list it as "free", then that means their app sucks and they should probably scrap it and make something worth selling. There is absolutely no need to plaster ANY app with ads. Many paid apps have ads and some free apps don't have a paid version, so the other common excuse to, "Just buy the paid app instead of downloading the free one.", is just as lame.
To answer the initial poster's question; yes, if I could I would block iAds and other forms of ads on my iPhone. In fact I do exactly that. Jailbreak only of course. Just install Firewall IP and add "com.apple.adsheet" to your Global Deny list. Denied! There are many other ad companies which can be blocked in the same manner.
"How do you expect developers of free apps to make money?"
I don't, and neither should the developer. Don't release a "free" program and expect to make money. Release an app worth buying and I'll gladly pay for it.
To stave off at least some of the inevitable snide comments from morons with their heads in their asses of how I'm just some entitled kid too worried about screen bleed; know that I am typing this response on my Mac Pro, I use an iPhone 4 and I work for a medical company who, along with its other products, now develops iPad and iPhone apps for simulation and training of doctors and other medical professionals. While most of our apps are developed for specific clients and delivered at the enterprise level to in-house staff only, (not available on the app store), we do still have one iPhone app that is on the App Store and it's actually free. It is a lite version and utilizes absolutely no ads of any kind. We don't rely on the "ads support our app" crutch, we just develop good software and coincidentally people pay good money for it. Funny how it works that way.
Saturating apps with ads can only be defined as either greed or just plain terrible software, and any excuse otherwise simply means that you have had too much Kool-Aid to drink.
