So why was it blocked? I'm not sure, and I'm now hearing a couple different stories. One story going around Twitter was that Sony had their ebookstore integrated into the app and that's why Apple bounced it. I doubt it; everyone else has the ebookstore outside the app (ie Kindle). Sony wouldn't make such a basic error.
The other story I've heard is from the NYTimes (reg req):
The company has told some applications developers, including Sony, that they can no longer sell content, like e-books, within their apps, or let customers have access to purchases they have made outside the App Store.
Apple rejected Sony’s iPhone application, which would have let people buy and read e-books bought from the Sony Reader Store.
Apple told Sony that from now on, all in-app purchases would have to go through Apple, said Steve Haber, president of Sony’s digital reading division.
Even for Apple, I'm not sure that makes much sense. Yes, we know Apple are trying to get a cut of all things sold on iOS, but going after the reading apps is simply going to fail. Apple are setting themselves up to be in a fight with everyone.
On the upside, I'm looking forward to when Apple tries this with Amazon. You'll know it happened because the next day Amazon will launch their Android App Store.