Apple Rejecting Apps Based on 'Limited Utility'

One developer emailed this video and rejection letter for their app called Pull My Finger. Especially concerning is that Apple did not reject it due to it being offensive, but instead rejected it due to "limited utility":

"Hello Developer,

We've reviewed your application Pull My Finger. We have determined that this application is of limited utility to the broad iPhone and iPod touch user community, and will not be published to the App Store.

It may be very appropriate to share with friends and family, and we recommend you review the Ad Hoc method on the Distribution tab of the iPhone Developer Portal for details on distributing this application among a small group of people of your choosing.

Regards,

Victor Wang
Worldwide Developer Relations
Apple, Inc."

I think this sets a very bad precedent. How useful is Koi Pond [App Store]? (which remains the #1 app in the App Store).

Here's a developer video of Pull My Finger being demonstrated:

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