On the surface it would seem the idea would be to prevent a malicious program from terrorizing the devices. But what would happen if things go sour between Apple and an iPhone app developer, Apple may decide to pull the plug on them, both at the store and on people's individual phones. According to the author of iPhone Forensics, the iPhone “phones home” to retrieve a list of blacklist applications.
Removing a given application from the store is quite understandable and should be left at Apple's discretion, but the other possibility not at all. Also given the amount of publicity that such a move would draw I don't see it as likely, but some people are protesting its mere existence - if the report is true.