In-app purchasing refers to the ability of a smartphone or mobile device to facilitate the sale of products or services within a specific application or "app." This added functionality has opened many new markets for the makers of various mobile applications. In-app purchasing functionality can take many forms in different applications, with different methodologies, functional features, and integration into an interface.
Many in-app purchases occur in games, where users are able to purchase virtual goods for the game through the app itself. It provides a new measure of profitability for apps that are often free or very inexpensive.
Techopedia explains In-App Purchasing
Some developers use special tools and resources to construct in-app purchasing functionality. Some resources are specific to a brand/model of smartphone, where third-party services facilitate in-app purchasing for app developers.
Other types of in-app purchasing accommodations involve specialized currencies. Some of these virtual currencies may be much easier to code than actual cash transactions, which may require that merchant credit card processing arrangements be built into the app itself. Alternative virtual currencies can also help create easier purchasing setups for end users. However, any of these in-app purchasing systems will require an eventual transfer of funds, and security for both the actual transactions and the in-app fiat transactions.