The way to tell is that you can kick the hardware.

Yes... apps are just a subset of software. Apple has used the term Applications since the early days of the Mac. The OS X dictionary defines them this way:

"a program or piece of software designed and written to fulfill a particular purpose of the user"

There was a time when desktop applications were small too. The first version of Photoshop I ever saw, when compressed, fit on an 800K floppy. Apple released the source to MacPaint 1.3, an early Mac application. It's only 67.8K

http://www.computerhistory.org/highlights/macpaint/

iOS apps may have simple interfaces, but the hardware is powerful enough to do many things with. I think VLC is a good example of a non-trivial app. It's much bigger than MacPaint!

http://m.macupdate.com/info.php/id/35314/vlc-media-player

I wonder how different Apple's success would have been had they called it the Software Store rather than the App Store.

Apps are not software ---for certain constrained definitions of "apps" and "software"