I have recently came across this article that contains some interesting numbers about the different versions of Android that people currently use. There has been a long debate about the "device fragmentation" in the Android world and how it affects security.
From the perspective of somebody who maintains an app this means that a lot of time goes into maintaining compatibility that I would prefer to spend making new features. GPS Essentials is still compatible to Android 1.5 and at the time of this writing 14,336 users are running GPS Essentials on the very first public version of Android.
From the perspective of somebody using one of the Android 1.5 and 1.6 devices, the new apps that lack backward compatibility just don't appear on Android Market and more and more apps just don't update any more.
Not the best environment to build a solid relationship between a software company and its customers.