VLC and Apple have not been able to reconcile their differences on licensing issues and finally, the app has got an ejection notice
from the iTunes store. Apparently, Remi Denis-Courmont, a lead contributor to the VLC project, was not happy about iOS port of VLC, provided by Applidium. His assertion was that App Store purchases have Digital Rights Management code attached to them and therefore are not compatible with VLC's GNU Public License.
VideoLAN, the group behind desktop versions of VLC, did not engage itself in the war against Applidium port, which finally led to the departure of the App from the store. So basically, the incongruence between the principles got a little out of hand and spoiled the party for most of us. If you have already downloaded the app, then you are in look and if you were looking around, then good luck finding other equally good app.
Source: TUAW