Instapaper has little need for a free app because it's so unique; there are few paid alternatives, let alone free ones. If you're building something less extraordinary, offering a free app with an in-app upgrade path makes more sense. The free-to-pro transition seems to work better with a single app using in app purchases (to remove ads and unlock features) than with two separate apps. It's possible to structure the…
It is entirely normal, but happened at exactly the right time.
I'm not a big fan of Marcos because I read a sense of desperation in virtually all he has said lately (just look through his recent archives and you'll see someone tilting into the wind). Further isn't it a bit ridiculous for someone to have gotten big on the backs of a free app to then -- after they've established the network effect and have market presence -- proclaim that free apps aren't necessary?
It's a lesson with no meat at all. If this app started at $4.99 and became as popular as it is, then you'd have a story. Otherwise honestly it reads more like an attempt at misdirection for people who might follow.