It doesn't block other ads. It blocks analytics from competitors. So you are free to run analytics and ads from whoever you want... unless they are own by a device manufacture that directly compete with the iPhone.
Depending on how strictly Apple interprets 'affiliated with' and 'primary business', which aren't strictly defined in the license agreement, that's pretty much everyone in the space - even the 'independent' mobile ad networks have relationships with carriers, and carriers certainly distribute mobile devices.
It's a pretty typical Apple license agreement, really - it's extremely wide-reaching, open to interpretation, and the real question is how Apple will enforce it at any given point in time.
Edit: Really? I'm getting downvoted for this? Gruber's point that Apple's critics won't let facts get in their way gets proven once again.