Eight days after Apple's new iPhone went on sale, an international team of programmers announced on Saturday that the device had been "pwned" — hacker jargon for "controlled" or "compromised."

The loosely organized group, which calls itself the "iphone-dev team," played an important role in the worldwide dissemination of the original iPhone, releasing a series of tools that allowed the device to run third-party software and to work in countries where Apple had not yet struck deals with local carriers. By February 2008, estimates of the number of unlocked iPhones in circulation around the world ranged from 800,000 to 1.5 million. (link)

But the value of the latest hack, dubbed Pwnage 2.0 and available for free download here, is not so clear.

For one thing, although it "jailbreaks" the new iPhone — meaning it allows it to use programs not authorized by Apple — it does not yet "unlock" it to run on unauthorized cellular networks.

Moreover, the very real needs that the iphone-dev team served in the first year of the iPhone's release have largely dissipated.

Whereas there were almost no native third-party programs for the original iPhone, today there are hundreds available at Apple's App Store, 25% of them free. (See here.)

And even if the iphone-dev team releases an unlock tool for the new iPhone — which it probably will soon enough — Apple (AAPL) and its partners have effectively shut down the black market for unlocked iPhone 3Gs by requiring that buyers either sign a long-term contract with a carrier or pay a prohibitively high price for the phone. The official price of an unlocked, pre-paid 16GB iPhone in Italy, for example, is 569 euros ($888).

The real value of the new tool — which can both jailbreak and unlock the original iPhone — may be for people who want to use the iPhone classic in countries with expensive calling and data plans (Canada and New Zealand come immediately to mind).

But there are risks to consider. Installing any unauthorized firmware on an iPhone voids the warranty and could "brick" the device. Even though the new jailbreak program has an easy-to-use interface and is supported by step-by-step instructions — with screen grabs — a high percentage of the user comments here and here are from iPhone owners who have run into serious problems.

Don't be fooled by the friendly interface. Pwnage 2.0 is not for the faint of heart.

UPDATE: Erica Sadun, an iPhone developer and veteran jailbreaker, reports on TUAW that she has liberated her iPhone 3G with the new tool. "Without getting in details," she writes, "I'd rate the new 2.0 Pwnage software as 'for dedicated hackers only.'" (link)

Three days ago it seemed as though the world had finally opened up for would-be iPhone developers.

After eight months of pent-up demand, the pieces were in place to begin exploiting the new platform in earnest. Getting hold of the free software developers kit (SDK) was as simple as entering your iTunes name and password. The tools were powerful. The support was rich.

The programmers were "excited," Apple's PR department assured us more than once. On Wednesday, the company issued a press release to announce that an astonishing 100,000 copies of the SDK had been downloaded in just four days. Said Apple (AAPL) product marketing VP Phil Schiller: "Developer reaction to the iPhone SDK has been incredible."

Developer reaction today is somewhat more muted. "The twitterati," writes Erica Sadun at TUAW, "are reporting widespread disappointment and anger,"

It turns out that it may be easier for a camel to get through the eye of a needle than for a third-party developer to get into Apple's iPhone Developers Program.

By week's end, almost everyone who had downloaded the SDK and offered to pay the $99 ($299 for enterprises) to become an official iPhone or iPod touch developer had received Apple's polite but firm rejection letter:

Dear Registered iPhone Developer, Thank you for expressing interest in the iPhone Developer Program. We have received your enrollment request. As this time, the iPhone Developer Program is available to a limited number of developers and we plan to expand during the beta period. We will contact you again regarding your enrollment status at the appropriate time. Thank you for applying.

What stings for the developers who got what reads like a pink slip is that they know Apple has already let its favorite partners under the tent. In addition to the companies that demoed at the March 6 event (EA, Salesforce, AOL, Epocrates, Sega) Apple quoted a quite a few more the press release (Intuit, Namco, Netsuite, PopCap, Rocket Mobile, Six Apart and THQ Wireless).

"The articles going around saying Apple is 'stalling for time,' implying that everyone is getting 'rejection' letters, are false," writes David Schroeder, who manages Apple support at the University of Wisconsin-Madison, in a MacRumors Forum. "Select developers and enterprise customers are already included in these programs."

One the bright side, he adds: "When June arrives and iPhone OS 2.0 is final and the App Store is rolled out, everyone will be able to participate in all developer programs. Also, to be clear, NO ONE has to wait to begin developing and testing their iPhone apps today. Anyone can download the iPhone SDK beta for free, and there is nothing stopping you from developing iPhone apps now."

Well, not quite. Despite Schroeder's assurances, U.S. developers have no guarantee they'll ever be accepted into the program (developers outside the U.S. need not apply at this time). Meanwhile, without Apple's blessings they are reduced to working on an iPhone or iPod touch simulator, unable to test the devices' touch screen or accelerometer — key features for game developers.

Besides, who wants to be the second — or 100th — developer to introduce a particular kind of app, especially when the first to market has deep pockets and an inside track at Apple.

"In other news," writes Daniel Jalkut to TUAW's Sadun, "it looks like the Jailbreak Developer Program still has open slots, and people are getting approved as I type."

UPDATE: It appears this whole thing was a hoax. This was posted Monday on a MacRumor forum:

Hey Guys,

It's finally time I just come out and say it; I lied.

Tiny-Code never had any relations with Apple, Inc. or any other division of Apple. Never had the new firmware or any pre-SDK pack. Certainly never signed any NDA.

I find it interesting that a simple joke on the front of a minor at best Installer.app repo can cause so many wakes…

Sincerest Apologies,

KellyTM/Tiny-Code Developer (link)

Thanks reader Xandro for the tip.

—

Apple's (AAPL) relations with third-party developers have never been easy, and the little psychodrama that unfolded over the weekend with a one-man outfit called Tiny Code is a classic case in point.

It started on Friday when Tiny Code, which publishes applications and software patches for the iPhone, announced on its website that it was no longer working with firmware 1.1.3 — the current version of the iPhone's underlying software. Then it added:

We can't say much, but we are working with Apple and with their SDK for the next firmware release and SDK applications and we shouldn't be missed for long. We will no longer update our Installer.app repo for legality reasons and you should see us soon on iTunes.

This was news. Steve Jobs had announced in October that Apple would be releasing its much-anticipated iPhone SDK (Software Developers Kit) before the end of February, and there were reports last year that a handful of large third-party developers — like the giant gaming company Electronic Arts — had been seeded early copies. But this was the first evidence that Apple was reaching out not only to smaller developers, but to a programmer who had been deeply involved in developing unauthorized apps for jailbroken iPhones.

Then, in a sidebar, Tiny Code adds:

UPDATE: We are now targeting fw 1.1.4 Alpha 2.

This was the first anybody outside Apple's nondisclosure circle had heard anything about 1.1.4, and it set off a rush of speculation. Did the fact that the firmware was in alpha 2 mean that it was just around the corner — perhaps for release at the rumored Feb. 26 Apple event? Did the fact that it was not yet in beta mean that it was running late? Would it be released with the SDK or a few weeks after? Would it break all the existing third-party apps and send the hackers who unlock iPhones back to square one? (see, for example, here)

No sooner had the speculation started than Tiny Code's website disappeared, replaced with an inoffensive link to Apple's official iPhone Dev Center. The original message (pasted above) was preserved in a screen grab at macenstein, one of the first websites to report the story.

How is this an illustration of Apple's uneasy relations with third party developers?

Because of what happened next. Kelly™, the man behind the one-man Tiny Code operation, tells the story in a four-point message posted yesterday on a MacRumors forum:

One: Yes, I have a copy of the Apple SDK for the iPhone targeting firmware 1.1.4.

Two: Yes, Tiny-Code.com was ordered to be removed from operation by Apple, Inc because by releasing firmware versions and stating I had possession of the firmware and SDK was apparently a violation of the Non-Disclosure Agreement I agreed to when I accepted a copy of the SDK and firmware.

Three: Yes I was wrist-slapped by Apple and won't be included in any further firmware beta's or testing/coding.

And finally, Four: No I cannot disclose any more about anything without getting into more trouble, stating the above is ok because well let's face it, there is documented proof I already have and Apple already backhanded me for it. (link)

As Seinfeld's soup man might have put it: "No more soup for you, Tiny Code!"

What's next for the Apple (AAPL) iPhone? A flurry of new features — starting with a "locate me" pseudeo-GPS function on Google Maps — according to leaks that have been making the rounds of the Apple blogs.

The scoop goes to GearLive.com, which for the past two days has been exploring what appears to be a pre-release version of firmware update 1.1.3. The improvements (documented with screenshots) that it has discovered so far include:

• Edit Home Screen – Rearrange icons on your home screen
• Drag icons around with your finger
• Locate Me integration with Google Maps (apparently by triangulating cellphone towers)
• Send SMS to multiple people
• Add Safari Bookmarks to your Home Screen (example)

Responding to commentary that questioned the veracity of their claims, GearLive's Andru Edwards and Nate True have posted an eight-minute video walkthrough of the new features that seems to have made believers of the skeptics. YouTube has removed its mirror version, but you can see the original here.

It's not clear how the pre-release software made it out of Cupertino's secretive skunkworks two weeks before Steve Jobs' Macworld keynote. Ars Technica reports that it may have been leaked by someone at Apple as a Christmas present to an iPhone hacker to aid in jailbreaking efforts. As with the last update, version 1.1.3 disables unlocked iPhones and breaks third party applications that run on jailbroken phones.

That was quick.

Hours after Apple (AAPL) published firmware update 1.1.2 for the iPhone and the iPod touch — and even before it was officially available for installation through iTunes — rogue programmers had managed to "jailbreak" the iPod touch, once again allowing unauthorized third-party applications to run on the device. See Erica Sadun's report on TUAW here.

As of this morning, however, the iPhone still hadn't been re-jailbroken. That means that, as predicted, iPhones updated from 1.1.1 to 1.1.2 won't run any of the dozens of applications users have been loading on their phones using one-click installation programs like Jailbreakme.

The firmware update appeared on several Apple blogs last evening. News of the first jailbreak was posted shortly after midnight.

Early users are still trying to pinpoint the advantages of performing the upgrade. The chief improvements seem to be the ability to add events to the calendar and easier access to languages other than English. There are reports of bug fixes and performance improvements, but they haven't been documented.

Firmware update 1.1.2 comes preinstalled on the new iPhones that go on sale in Europe today. If you already own an iPhone, you can download the update here. And although iTunes doesn't recognize its existence yet, the iPhone can be forced to install the update. Here's how: After downloading 1.1.2, connect your iPhone to your computer, find your iPhone in iTunes, hold down the option key (on the Mac; Windows instructions may differ), click on Check for Update, and open the downloaded file.

The update takes about five minutes to install, after which any apps you have added will have disappeared — for now, anyway.

[Image courtesy of Engadget.]