Anyone can download the SDK and develop an application, but you have to join Apple's iPhone Developer Program, and Apple is only accepting a "limited" number of applications at the moment. The application development process will be very similar to how applications are developed for Mac OS X.
Applications will be distributed through Apple's newly announced App Store, which will be built in to the iPhone but is also accessible through iTunes. Apple plans on personally approving every application destined for the iPhone.
The applications are wirelessly downloaded to the iPhone over either EDGE or Wi-Fi. Developers name the price of their applications themselves and get 70 percent of the revenue from sales of their apps; Apple gets 30 percent. Free applications will be listed for free on the App Store and iTunes.