Whenever you decide to delete an iPhone app, you're prompt to rate it. The only other way to rate apps, as far as I know, is to go back into the App Store and find the app again, which requires a bit of effort and isn't very intuitive.
The app rating process has a self-selection bias, as only those users with extreme feelings about the app are bothering to rate it: either people who are deleting the app off their phones or people who like the app so much that they are going out of their way to rate it. The majority of users are going unheard.
While the rating system seems flawed at first glance, perhaps it's just right for Apple's needs. Apple has recently been on a crusade against pornographic content and apps that offer minimum user functionality. Its App Store has exploded in size so much that it is experiencing diseconomies of scale: there are so many apps out there that users are having trouble telling the good from the bad.
By encouraging a lot of ratings for apps that are consistently being deleted, the ratings quickly reflect these apps' true, poor quality. So while the distinction between 4-star and 5-star apps probably isn't that meaningful, Apple's system accomplishes a much more important goal: helping people avoid the duds.