Bloomberg's interview with Adobe's Shantanu Narayen reveals that Adobe is developing Flash for the iPhone, it's been in development since June 2008, and is a customized solution just for the iPhone.
Apple has said repeatedly that regular desktop Flash is too heavy (on CPU, and thus battery life) for the iPhone, whereas Flash Lite is too lousy. Jobs has coerced Adobe to create a custom solution. From Narayan's words of "the ball is in our court. The onus is on us to deliver," the engineering effort lies more in Adobe's engineering team than in Apple's.
Adobe actually said, back in September '08, that there would be a version released "in a very short time" if Apple approved it. Obviously either Apple rejected it, or Adobe themselves decided it wasn't quite resource-friendly enough to launch.
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