Frankly, I'm not certain that the part saying that applications developed using Apple Software may not be distributed outside the App Store is even enforceable. Where do you draw the line - if you loaded your work-in-progress on a development iPhone? what if you didn't, but used XCode as a text editor? does it kick in if you used the autocomplete feature? It all seems quite silly from a certain perspective - imagine the New York Times selling a typewriter and saying that they had right of refusal for anything you wrote with it.
I doubt they mean just using xcode, or no one would be able to distribute Macintosh apps. Linking against Apple's iPhone header files would be a clear violation, though.
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