I am in the process of releasing an application to the app-store. I recently saw that you can make your application free but have in-app purchases. When I saw this I thought that this could be used to create a free trial. However in Apple's Helpful Tips for Using In App Purchase In Free Apps it says
Don’t set time limits on any of the
functionality of your app, either for
run times or life times. Applications
that only run for a set number of
minutes per session, or that expire
altogether after some period of time,
don’t recruit customers so much as
leave a bad taste in their mouths.
I know that sometimes it's tough to know what Apple is thinking but does this mean they will not allow In-App Free Trials or that they frown upon it. Does anybody know if people have tried doing this?
As indicated in your quoted text, they will reject any app that is a "trial" in that it only works for a limited amount of time or number of uses.
If you want to remove advanced functionality and allow users to pay for them, that's perfectly acceptable. In fact, it's one of the main use cases they talk about. Just keep in mind that the free version of the app (before people pay for the advanced features) should do something useful, and it should not expire.
Also, something to watch out for is "placeholder" functionality, which will get you rejected. For example, if you make a game and have difficulty levels that must be purchased, you can't make it look like those difficulty levels can be selected and then prompt the user to pay for them once they try to select them. You can tell the user that there are missing difficulty levels and encourage them to upgrade, however, which is a subtle but important distinction.