Earlier quoted context omitted.
That might be the case at $.99. But if you go up a bit (even to $1.99 or $2.99), the amount of bad reviews like that decreases pretty quickly.
Do you know this from experience? I'm really curious how iPhone app customers "work".
1) Free users will destroy you in ratings, unless you are a universally known brand that is basically repackaging a pint-sized version of their popular website/application. I've seen people at the "Free" level say "I LOVE THIS APP BUT IT HAS THIS ONE SMALL PROBLEM SO I HATE IT AND GIVE IT ONE STAR YOU CAN'T PAY ME TO USE IT LULZY!" Freeloaders love free, but they will incessantly take advantage of it and are generally ungrateful, which shows in their ratings.
2) At .99 cents, you get casual and one-off users who know the value of their hard-earned dollar and will expect a relatively unreasonable amount of value because of loss-leader devs that price their complex apps that way to move up the charts. The 99-centers will conflate purchasing an item with an expectation of constant content refreshes or perfection in updates, or they will penalize. It's a false economy to try to appease these customers. Better to just cross fingers and hope to make it up in volume (or in-app purchases).
3) At 1.99-2.99, things start to get interesting. Your reviewers begin to appreciate the decisions you've made in the apps design or execution, give you actual usable (albeit terse and/or a bit angry) feedback, and ratings are a little higher overall.
4) At 3.99+, you are either a AAA game dev porting your blockbusters down to the iphone/ipod touch, or you're an indie that has built a following by selling volume pricing at first and then raising it up once you've cemented your position on the charts. Your reviewers are spectacularly verbose in their heaping of praise on you, and offer almost QA-level bug reports that you can use for your updates.
I think the sweet spot for someone starting in the app store is $1.99-2.99 US, plus a "lite" version with in-app purchaseable upgrade to the full version. Perceived value with a teaser freebie. If your app is at all useful/fun, then it'll gain an audience. I think alot of people just saw the "goldmine" app store articles and thought they could make an app that was just like iFart or iShoot "but cooler" and failed miserably.