Call him a reluctant entrepreneur.

Jay Freeman stays plenty busy with his graduate studies in computer science at the University of California, Santa Barbara. In his spare time he’s worked on applications for the iPhone, but now he’s competing against Apple itself.

As I wrote about last Friday, Freeman launched The Cydia Store, an alternative to the App Store, out of frustration with Apple’s policies. He couldn’t get his own Cycorder video recording application approved by Apple which has blocked other iPhone apps it says duplicates functions Apple already provides. Cycorder doesn’t currently compete with any Apple program for the iPhone, though the company is expected to release video recording capability for the device at some point.

To put this all in perspective, Apple’s restrictions come at a time of unprecedented growth in iPhone software. The iPhone App Store has reportedly passed 25,000 applications, which gives it more applications available for download than for the venerable Windows Mobile (at about 20,000 apps), a platform that’s many years older.

Clearly thousands of developers are happy to live under the friendly dictatorship of Sir Steve, but not Jay Freeman. “Apple drives a lot of developers insane,” he told me. “It’s not just Apple saying no, sometimes they effectively mothball some program. I’ve heard stories of companies waiting two to three months with no word from Apple either way.

Freeman’s alternative is Cydia, an App Store for jail broken iPhones). He plans to charge developers no more than the thirty percent commission Apple charges developers for distribution and payment processing, perhaps less. But Apple says users who jail break their iPhone void their warranty. There’s also a chance Apple could harm Cydia’s usefulness — or usability period — in future iPhone software updates.

Going beyond the App Store

But Freeman is undeterred. He plans to take Cydia a step beyond the App Store with a social media twist by offering users a way to see what applications friends are using and a rating system.

“The ratings and comments will be tied to Facebook Connect so you can see profile pictures and things like that.”

As for Apple, he said he hopes they see his effort as something that helps the iPhone, but admits, “I’m not holding my breath.”

“They lock people like me out with interesting products and that’s what forced this alternative market,” said Freeman.

Back in 1995 Dave Ditzel and a bunch of other smart engineers founded Transmeta, a startup with some revolutionary ideas for creating super energy-efficient, x86 (Intel)-compatible chips. The company’s plans were shrouded in secrecy until it burst on the scene in January, 2000 to announce its first products and a team that included none other than Linux creator Linus Torvalds.

The company got some early glowing reviews, including by yours truly before I set up shop here. I said in part:

“Transmeta’s Crusoe microprocessor promises to shake up the market for mobile computing devices, including everything from handhelds to Net appliances to traditional PC notebooks.”

But the company hit several snags before it finally got its first Crusoe chips out the door and, save for some licensing deals and sales to a small number of portable computer makers, fell far short of its ambitious goals or even profitability as a chip supplier.

Transmeta was of course way ahead of the curve with its focus on energy efficiency. The company transitioned from a chip supplier to licensing its technology to others, but eventually folded. As for Ditzel, he took a year off “working in my garden” and taking it easy.

I ran into him last night at Microsoft Research during an event we both attended on “The Innnovation Economy: R&D and a Crisis.” For the past year he’s been working at, you guessed it, Intel.

“I’m still having fun,” he said.

And for an engineer, why not? He said his job is trying to figure out what chips will be like eight years from now. “And what features they’re going to need that people will want to keep buying them.”

Of course, his promotion of energy efficiency is welcome at Intel as that’s become a staple of its chip designs the past several years. If he has one complaint though, it’s the company-issued IBM ThinkPad T41 he has to use when traveling.

“I had what was essentially a netbook made by Sharp [running on a Transmeta processor] back in 2002 that weighed a lot less and ran plenty fast.”

PALM DESERT, Calif. — The mood here at the upscale Desert Springs hotel is upbeat. And why not? There was plenty of sushi, fancy hors d’oeuvres and drinks to be had at the warm Sunday evening reception. And DEMO attendees seemed happy to see old acquaintances and contacts still gainfully employed or at least acting like it.

DEMO is one of the longest running tech tradeshows going in the U.S.; the first one was in 1991. It’s not really a tradeshow in the traditional sense. My former boss, Stewart Alsop, created the event to be the site of exclusive product and technology rollouts. I was there, for example, at the debut of the first Palm Pilot, one of many important “firsts” (along with plenty of quickly-forgottens) to make it to DEMO’s stage.

When Alsop moved on, tech journalist David Coursey replaced him, but for the past 13 years another ex-tech journo, Chris Shipley has been executive producer and host. The Shipley era comes to an end at this week’s show as she’s going to focus on her work as a consultant to startups at her company Guidewire Group. This week’s event will be co-hosted by Shipley and new DEMO head Matt Marshall, CEO of VentureBeat.

But the number of companies participating is way down. There were 72 companies at the last DEMO in September; there are only 40 at this week’s event.

Marshall claims DEMO’s owner, tech publisher IDG, is committed regardless of the economy. “We’d be here if we could only get ten companies,” he told me.

That said, Marshall actually worked to beef up the line up of companies, by stretching the tradition of product exclusives a bit.

The Monday and Tuesday conference days will feature sessions with established companies like Facebook, Google and IBM discussing topics like Social Media, Productivity 2.0 and Energy Efficiency. Shipley had sessions at past DEMOs, though they tended to be more university and research focused. The last DEMO did feature a lively discussion on search with reps from Google, Microsoft and Yahoo on hand.

So it might not all be brand spanking new stuff, but Marshall thinks the sessions on cutting edge topics will be a nice complement to the standard eight minute on stage demos that are strictly product focused.