In a long-running series of TV commercials for Apple's popular iPhone, a genial voice proclaims, "There's an app for just about anything."

Well, not anything. "The iPhone would be a great market for us," says Bhaskar Roy, "but Apple won't let us do live video yet." Roy is co-founder of Qik, a Redwood City, California, company that makes an app (also called Qik) that lets people broadcast live video on the Internet using their cell phones. Qik's software works on dozens of phones, including the HTC Touch and the BlackBerry Curve, and Qik's users include the actress Demi Moore and the political website Talking Points Memo. But so far, Qik has been unable to get the software approved for sale at iTunes's App Store.

That hasn't kept Qik off the iPhone. For the past year, the company has offered its software on a rogue iPhone app store called Cydia. Like iTunes, Cydia allows people to buy and sell iPhone apps. Unlike iTunes, Cydia is not sanctioned by Apple, which considers the use of unauthorized downloads, known as jailbreaking, illegal.

Even so, four million iPhone owners, mostly early adopters looking for programs that aren't yet available at the App Store, have flouted Apple's rules and jailbroken their phones. "From a strategy standpoint, we have to get our product to our users," says Roy. "If we have to do that through the jailbroken community, then so be it."

Apple, through a spokesperson, says that jailbreaking violates the iPhone's warranty and can cause the phone "to become unstable." It also constitutes copyright infringement, a company lawyer wrote earlier this year in a brief filed at the U.S. Copyright Office. But the legality of jailbreaking won't be clear unless and until Apple decides to go to court. "The legal questions aren't settled," says Wendy Seltzer, a fellow at Harvard's Berkman Center and an expert in Internet law and intellectual property. "But it's hard to see Apple suing over jailbreaking unless its business model is threatened."

The jailbreakers see the legal ambiguity as an opening. "The jailbreak community is like an incubator for cool ideas," says Cydia's founder, Jay Freeman, until recently a computer science Ph.D. student at the University of California, Santa Barbara."We're not doing anything illegal." Of course, he could be proved wrong about that, but for now Cydia is pulling in about $6,000 a day by selling dozens of programs you can't find on iTunes. These include PdaNet, which turns your phone into a laptop modem, and iProtect, an antitheft application that helps you find a stolen phone.

Most of these programs were rejected by Apple because they failed to meet the set of technical requirements that are designed to protect iPhones from excessive crashing. (Cydia recommends you back up your data before installing its software.) Apple also rejects apps for other reasons, including objectionable content and trademark infringement. By contrast, anyone can distribute an app on Cydia.

Despite the risks, selling on Cydia can be an effective way to market. After concluding that its $8 app was unlikely to get approved because of Apple's rules prohibiting camera applications, Snapture, a company that makes a camera-enhancing app that goes by the same name, opted to sell on Cydia instead. "We had to make a decision: Either put out a mediocre product following Apple's guidelines or do something really cool in the jailbreak space and focus on building our brand," says Samir Shah, a co-founder of the company. Snapture quickly became a Cydia top seller, attracting some 500,000 users.

Little wonder that Apple soon tweaked its developer requirements to allow Snapture and other camera apps on its App Store. Within days after Apple began selling Snapture in September, it rocketed to No. 6 on the bestseller list. In Snapture's first two weeks with Apple, it sold some 85,000 copies. Not bad for a tiny software start-up. "I think Apple realizes that the jailbreak developers are pushing the platform to its limits," says Shah. "They can squash it and cause a PR headache, or they can let the best innovations bubble up to the App Store."

34 Million iPhones