Although all developers should be building for both iPhone and iPad, many of us launch with an iPhone app, then add iPad support later in the product cycle. Since so much of developing a great app is UI work, this is smart tradeoff for most small studios. Imagine Clear for iPad - it would need to be dramatically different.
On the other hand, a lot of developers do build for both iPhone and iPad, but make them separate for pricing reasons. A lot of games do this. Buying two versions of the app is a pain for various reasons, so many people end up with iPhone versions of an app on their iPad.
Unfortunately, using iPhone apps on the iPad has historically been a terrible experience. You could either choose between wasting 80% of your iPad’s real estate by running the iPhone app in tiny mode, or looking at an extremely ugly 2x version of the app. The blown-up mode on the original iPad looks so bad that having it off by default is clearly better.
Enter Retina
When Retina iPhone apps came along, many expected the iPad to use high-resolution graphics when iPhone apps are zoomed to 2x. Unfortunately, this is not feasible with existing apps since the apps have no sane way of transitioning between high-res and low-res mode. Apps would need to either launch at Retina and then do an ugly downsample at 1x size, or launch at non-Retina and do an ugly upsample at 2x size.
With the introduction of the new iPad, iPhone apps now display Retina graphics. The difference at 1x isn’t too dramatic, but at 2x, iPhone apps actually look pretty decent. Surprisingly decent actually - the giant UI elements make you naturally sit back from the iPad, giving the pixelation a nice little blur, and hitting UI elements is much easier than in 1x mode.
After playing with some iPhone apps in 2x mode on the iPad 3, I’d say that Apple should make 2x size the default when you launch an iPhone app on a Retina iPad. Further, I’d argue that the urgency for porting iPhone apps to iPad is lower now that there’s a nice way to view them.
In an ideal world you’d never need to use an iPhone app on your iPad - but at least now it’s a lot nicer.