I find myself having little sympathy for people who do stuff like hand their kids an iPhone and then get all upset and try to blame others for what the kids may have done with it that ended up costing the parent money. Either supervise them, or accept that you've handed them a way to spend your money if you're not careful.
You can easily disable in-app purchases.
http://www.cultofmac.com/72481/how-to-disa...-app-purchases/ iPhones are sold to adults - adults who presumably can read the manual and should not just assume that the phone is "kid proof" (or stupid adult-proof!). I actually don't see how this case has been allowed to go forward, given that there ARE controls and this parent simply didn't enable them before handing his child his iPhone. Would this same person hand his 9-year-old the keys to the car so she could "play" in the car? (oh, gee...I had no idea she'd actually start it and roll it down the driveway and over the next door neighbour...)
Apple has also responded to complaints and improved the authentication procedures for iTunes and in-app purchases, eliminating the 15 minute window when the PW would remain active and not need to be re-entered. And if you hand your 9-year-old your PW, you have nobody to blame but yourself.