If you jailbreak your phone you can install any apps from Cydia, the unofficial installer that supports multiple sources of unofficial apps.
The problem is that only a very small number of iPhones/iPod Touches are Jailbroken, and you have to deal with purchasing/registration yourself if you're a developer.
the only legitimate way to install iPhone apps is through apple's own app store. you can go the jailbreak route, but that's dodgy and error-prone, and you'd only be targeting the fringe that way.
As far as I know, unless your iPhone is jailbroken, you will be unable to run applications without a digital signature from Apple. Thus, for the vast majority App Store is the only place to get their apps.
Maybe, someone who is an actual iPhone developer, can explain the process in more detail.
From a developer point of view, you're able to compile your own applications for up to 100 devices (as long as you have the device unique identifier (UUID) for each of them). There's no easy way to do this for the public however.
So err, what happens if you are developing apps on behalf of clients, and you want to demo apps to each of them, and you end up with more than 100 clients?
There's a different kind of registration for that I believe, I have a standard developer program license ($99USD/year), there's another "enterprise program" which I think can do 500: http://developer.apple.com/iPhone/program/apply.html
The enterprise program lets you issue a provisioning profile that's not tied to UUIDs. Translation: you can have as many app users as you want.
On the other hand... there's no easy way to charge. The provisioning profile is all that's needed to run the app.
Also, these profiles are intended for "internal distribution" (inside a company). I'm sure Apple will blow up your certificate if you try public distribution.
I generally have clients sign up for their own apple certificate under their company, so the app purchases go directly to their bank account, the app the branded under their company name, and you don't have to think about that.