I'm sure they're not expecting a 100% conversion rate to paying customers but it definitely does work. say you now want to buy an album, if you see it for the same price on amazon and a site you hadn't used before (e.g. 7digital) then you are most likely to choose to buy it from Amazon as you're already set up to buy from there now you've had your free download.
Also, there are plenty of people who are not keen at all to buy digital anything, so giving them a free go at it so they can see it is not too scary may mean they are willing to pay money in the future, also there are a lot of (maybe older) people that are given a tablet for christmas, who are not computer savvy, so having an offer like that may make them aware of something they didn't even know existed before.
Also, for all your complaining about it, you have their app store installed and are using it for a decent while if I think about it, and have used this offer also. So already they've moved you from being just an app store user to an app store and mp3 user so they are giving you a guided tour of their digital world and you are taking it. Maybe that is worth a digital pound to them.