A while back I wrote a somewhat tongue-in-cheek post defending the practice (but not necessarily the publication) of artists imitating and leapfrogging off each other, after someone did a lousy hack-job of my art. But I'm not going to defend this at all:
Look familiar?
I don't care whether your app is free. Don't use someone's art without permission.
*UPDATE*: I got a kind e-mail from the developer saying they will take care of the problem and they have already taken the app down. I'm going to leave this post up because I was unclear in the past about how I feel about plagiarism, and I really want to stop this sort of thing from happening for artists everywhere.
Thanks to everyone for the support!