The reason behind this decision of Apple is not pushing forward software technologies but instead allowing the way for earning more profit. Free to download Flash applications and games are very common on internet. And actually they tend to be more popular compared to applications in App Store. However, Apple is making million of dollars through App Store every year. Thus actually free flash games downloadable through internet is a threat to them.
They claim HTML 5 has the ability to do the same stuff Flash does. However, they too know that coding games in HTML 5 is a pain in the ass. You can find out more about this if you read the blogs about development of Angry Birds for HTML 5.
Thus Apple is playing a dangerous game, while they are trying to profit through not having Flash, Android 3 phones and pads are growing their market share. According to me one of Android 3's main advantages is having Flash support.
We will see whether Google will be dominating another market in near future as they have done with search engine, e-mail and maps.
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