Yes. You have to pay the one-time $100 developer fee. And Apple has the right to veto apps or developers, yes.
But this is not your typical SDK kind of arrangement like with palm pilot or something. Apple is going to host developer apps on iTunes, and handle all of the credit-card transactions, app storage etc. You set the price on the iTunes store, Apple gives you 70% of each purchase. Free apps will be hosted for free, Apple does not charge.
This is a huge opportunity for all sorts of developers, everything from one-man freeware operations, up to gaming giants such as EA (porting Spore to iPhone).
There are like 100,000 developers signed on already. (So if it really was true 90% have been rejected, we would be talking about a million people wanting to develop on the iPhone!)
Personally, I think this it will end up being a big gaming platform and will seriously eat into the PSP space.