In iPhone Enterprise and SDK: First Impressions and Questions John Gruber notes “there is no option to circumvent the App Store” and asks:

My question, though, is how will this be enforced technically? If developers can install on their iPhones the apps they’re working on, what will stop users from doing the same? I’m guessing it’s tied to digital certificates, but that’s just a guess. There must be something, though.

From the Macworld Apple iPhone Event live update page I think that question is answered.

11:10 PT: “We think a lot of people are going to want to become an iPhone developer.” It’s really easy. Go to our web site and download our SDK for free. Run the Simulator on your Mac. You can join the iPhone Developer Program if you want to run the app on an iPhone or iPod Touch, and distribute your app. To join the developer program costs $99.

…

11:24 PT: What are you doing to make these applications secure? “This is a big concern. It is a dangerous world out there. We’ve tried to strike a good path here. On one side, you’ve got a closed device like the iPod, which always works. You don’t have to worry about third-party apps mucking it up. And on the other side, you’ve got a Windows PC. We want to take the best of both, the reliability of that iPod and we want to take the ability to run third-party apps from the PC world, but without malicious applications.

“The developers have to register with us, and for $99 they get an electronic certificate, and that tells us who they are. If they write a malicious app, we can track them down, we can tell their parents, and we will know who they are. And we can turn off the spigot if we need to.”

I added emphasis on two sentences above.

Here’s my interpretation and, I think, the answer to John’s question. For free anyone can run a Cocoa Touch application on the simulator but the SDK and the Xcode tools alone don’t allow an application to be installed on an iPhone or iPod Touch. To get an app onto an actual iPhone requires paying the $99 for the iPhone Developer Program. The Developer Program is essentially a certification program.

John assumes the $99 is for getting listed on the App Store. I think he’s off. I think the $99 is for the code signing certificate. Getting listed is a separate (but no-charge) hurdle.

But I haven’t watched the video (via TUAW) for myself yet.