The Verge reports on the issue (via Engadget):
The issue appears to have resulted from a server-side update from Apple that has broken the ability for a device running iOS 3.1.3 and earlier to download new apps, although updates still work and apps downloaded via iTunes can still be synced over from the desktop. There are several other issues with the App Store on these devices, including missing thumbnails and poorly-rendered pages.
There is a growing thread on Apple’s support forums discussing the issue, and it’s unclear whether this is an intentional act from Apple or some type of error on the part of their servers. From the Apple support forums:
1) clicking on the price no longer downloads the app,
2) the ratings button does nothing,
3) the ‘tell a friend’ and ‘git this app’ buttons jump back to the top of the app window,
4) pictures usually don’t show up. They usually appear as five gray rectangular boxes with white borders (though in one app one too-large-for-the-window picture shows up (see pic),
5) the ‘app support’ button still goes to the developer’s website.
6) the ‘top in-app purchases’ banner is just text now.
What’s most concerning is that iOS 3.1.3 is the final version of iOS issued for the original iPhone and the first-generation iPod touch, meaning that users of those devices are no longer able to download and install new apps.
Apple has so far declined requests for comment.