Why do I need a credit card number on file to download free apps?

I've had this itunes account for several years. The last CC that I had on file for making purchases has been lost (and reported as such). So, obviously my payment information regarding that card is no longer valid and I can no longer make purchases. Understandable.

I am, however, still waiting for a new card to be sent to me before I can go in an update the information.

What is boggling me is that when I attempt to download updates or other free applications, itunes (on my phone) keeps asking me to sign in and provide payment information (which I do not have). It will not let me download any free apps or updates without it.

1. Why?
2. How do people who use gift cards or paypal use this function on their iphone/itouch? (or, really anyone who either doesn't have a CC or doesn't want to use it). There's GOT to be a way when I see other people walking around with their iphones/itouches dl'ing free apps just presumably without a linked credit card on their account. Right?

I know all I really need to do is wait for my card and update my info when it gets here, but there are some pretty important updates that I kind of need now.