That's the point, isn't it? When I had an iphone, I always understood that there are no local terminal apps because apple banned them. They shifted the rules slightly since then to make it easier to make apps for teaching programming, but the goal was never to make generic dev environments. When I heard about this app, I assumed there had been a fairly fundamental change in the sorts of apps apple allowed. It seems like no such change occurred - apple just didn't notice what the app was doing until after it was released.
Good on the iSH people for giving it a shot. I doubt they'll break through the apple wall, but there's always a chance.