Mr. Charley - good question -
new players on the .99 version get a ton of extra coins & gems to get them started. Buying the same coins & gems on the free version would cost a bit over $10.
I hope that's enough of an incentive to encourage those who want the 99c version! But apart from that, and outside of an icon that says "free" on it, both versions are exactly the same.
We should (fingers crossed) be submitting an update to Apple tonight with some bug fixes and performance improvements for both version.