Apple has changed its in-app purchase policy, in wake of criticism over the ability of kids to rack up huge bills via in-app purchases. The changes come in iOS 4.3, which was released on March 9.
The new version of iOS adds another layer of security: in the past, in the first 15 minutes after an app was purchased, you didn't need to enter the iTunes password again. Parents who bought a game might hand the device over to a child, only to see a huge bill later as the children didn't understand they were racking up a bill.
However, it doesn't mean that a password needs to be entered for every in-app purchase. Once "unlocked," the in-app purchase policy means that purchases can be made for 15 minutes after the password is entered. Parents need to be remember that, and not just hand the device over.
On the other hand, parents can also disable in-app purchases altogether under Settings >> General >> Restrictions.