Not only this, but that ultimately the decision comes down to if ads and a free verson are even appropriate in the first place for your users, and if bad reviews for a free version will hurt your paid sales.

From my point of view as part of the Colloquy (irc client) team, we're trying to decide if a free version with no ads limited to one channel on one server would help sales. The problem is there's only one free/ad supported irc client out there on the app store, and it's a complete piece of crap and the reviews reflect that. However, the reviews for that app also reflect that most people downloading and reviewing are people who do not understand how irc works, and to an extent the reviews for our $1.99 USD app also reflect that - our reviews are pretty much a reverse bell curve where all the 4-5 star reviews are typically from people who know what irc is, and all the 1 star reviews come from the people who thought we were a sex chat app (seriously...it's getting tiring recommending these channels) but weren't satisfied with the learning curve and this whole thing evens out to 3-4 stars. If the percentage of people with no irc experience grows with the free app (as there is no longer that $2 barrier), the growing bad reviews from people who don't read app descriptions might hurt paid app sales if someone with irc experience does a search for 'irc client' and spots this horribly rated free version and a mediocre rated paid version.