Free app developed in 3 hours hits #1 and makes $20000. What we learned so far.

Based on my experience and observation of others it seems to occur fairly regularly.

(Also, I know my 4yo clicks on in-game ads by mistake all the time on my iPod, and I know I'm not the only parent who has discovered the miracle of iPhone/iPod gaming for kids.)

A reasonably high-end display advertiser will pay a relatively high CPM to have their brand associated with an object like an iPhone with a high perceived value, even if no one ever clicks, and especially if theirs is the only ad on the screen at a time.

With the insanely fine-grained targeting information that Apple has about you and your device ---such as your name, age, country and home billing zipcode, how much you use your iPhone, your purchase history with Apple, whatever other information you've ever given Apple like income and occupation, your current location (in principle), what apps you like, what music you like, etc.---they can probably pick the right ad for each user well enough get really, really good average click through rates. You'd be amazed at how well you can crank up the average click likelihood even with way coarser targeting information.

If you are a mortgage broker or a car dealer then 1000 clicks is easily worth $2000. Even if only a tiny fraction of them leads to a sale, each sale is worth thousands of dollars.

If you are Prada or Lexus and you need people to associate your brand with high-value objects like iPhones, then even high CPM's are a good investment; especially because high CPM's price out the rabble, so your fancy brand won't appear next to an ad for psychics or penis enlargers.

On your comment about ad-revenues, you may also want to consider the fact the $20,000 comes from ads and in-app purchases. The TC post doesn't provide a breakup and the revenue split isn't clear