If there are 1,000,000 iPhone/iPod owners who understand what background processes are and would love to have it, and there are 50,000,000 iPhone/iPod owners in total. Should Apple work to please the minority, to deliver them convenience that will likely cause issues to the majority?

Again, the success of iPhone as a gaming device has nothing to do with Apple’s review process, nor Apple’s limited APIs, it is about the Hardware inside this device, and the device drivers that Apple provided! Another very interesting point is that Apple is the Software and Hardware vendor, with around 30 Million device sold, with “almost” the same Software and hardware, which means Games developers are dealing with “almost” standard software and hardware with 30 Million item in the market!

I guess this answers your question: “If Apple were to have opened the App Store without any restrictions, would this have happened?” it has nothing to do with Apple’s restrictions.

by the way, most of the applications I used on my WinMob device where freeware from http://www.freewareppc.com/ .. very innovative, small programs that fixed great problems for me ..

“if the users are happy, that's all a for-profit company really needs.” That’s very true, and the only way that you keep your company profitable, is through keeping the users happy, and that’s only by listening to them… that’s the power of the community!

Apple was very successful to bring all the elements into harmony that fueled the iPhone (AppStore, iPod, nice design, good OS, Business Model… etc), but to sustain its leadership, they need to keep on top of others, and keep the customers happy!

I suggest that you read a very interesting book that gives great insights about those ideas, http://www.wikinomics.com/book/

Wisdom of the crowds is what drives the market:) , it’s the voice of the customers, so, in Apple’s example it is what powers the iPhone and the AppStore… but, people change their direction very quickly, as soon as a new product with a new feature comes out that matches their dreams!
Take an example MySpace and how Facebook took the crown! You can never underestimate the power of people, they are who make your product live or die! And they can turn overnight against you .

another point, Communities built great products, such as Linux and Wikipedia!

The success of iPhone and AppleStore is a different story, it is the business model, not the limitations! iPhone is a nice Gadget, it was built on top of the success of iPod, and presented a very distinguished user interface, and a revolutionary multi-touch screen that made all the difference! Packed with a powerful graphics engine. And a very capable Safari Browser. Those are the key points in iPhone.. real differentiators from existing devices at that time..! nothing had to do with Apple’s love of obsession, and limiting the creativity!
For AppStore, again, it built on the success of iTunes Store, it is the community who made this successful, as they used the iTunes and made it what it is! If no one used iTunes, it would have been history years ago! Apple managed to create a store for people to get what they want, when they want, and as easy as it can be with reasonable low prices, while motivating Developers by a unique shared revenue model that simply works for both! Everyone is happy, Apple, Developers, and customers!

It has nothing to do, what so ever, with Apple’s review process, or API restrictions!! (The App store is full with Fart apps for instance!).. that’s why ratings and reviews exist in the world! To let the Community promote things and decide what is good! Although people are not alike, but this help buyers in filtering the apps they are interested in.

The problem with Windows Mobile is MICROSOFT! They never put any real efforts to create a really reliable Mobile OS , However, it was an example how community can cover huge mistakes and render WinMo to a usable OS.

…. tbc

Yes, Windows Mobile is more open, more extensible, and can run a wider variety of applications. But, the quality of applications is far inferior than Apple's, there is no consistency in their user interface design and pretty much each application has its own rules to how a user interface should be, they are less stable — taking as much memory as they want leading to a degradation in mobile experience which leads to having to manually manage the memory on an daily, if not hourly basis. Windows Mobile never managed to be a mainstream device, and there were reasons for this — being too open made it too complex to withstand for an "average" user.

Certainly, there are some parts Apple could open up, like an API to the reminders, that wouldn't hurt. But I hope they never open it for background applications for example, unless they tuck in some pretty large RAM chips. And I hope they won't stop reviewing applications, or it would end up to be crapware-land, like how the Android Market is right now.

The most important thing they need to do is more transparency to their guidelines and their review process, but that's a developer issue.

Apple's pickiness has greatly helped shape what the App Store is today. Now, you see iPhone games that rival what is on the PSP and the Nintendo DS. If Apple were to have opened the App Store without any restrictions, would this have happened? Would it have encouraged developers to spends hundreds of thousands or millions of dollars on creating an application or a game? A distinction must be drawn between a "community" and a "hobby market". It is definitely not of Apple's, or Apple's users, interest to have a hobby market as an App Store.

So, while we developers complain about the limited APIs and the nightmarish review process, the end-user, that non-technical user, is unlikely missing anything. They are using the best applications ever developed for a mobile device and playing games that are incredibly rich and innovative, on their phone. The promise of applications and gaming on the mobile was made years ago, but only the iPhone realized it, and if the users are happy, that's all a for-profit company really needs.