Please note: this answer is obsolete, the functionality was removed from iOS simulator.
I have just found that you don't need to copy the mobile application bundle to the iPhone Simulator's folder to start it on the simulator, as described in the forum. That way you need to click on the app to get it started, not confortable when you want to do testing and start the app numerous times.
There are undocumented command line parameters for the iOS Simulator, which can be used for such purposes. The one you are looking for is: -SimulateApplication
An example command line starting up YourFavouriteApp:
/Developer/Platforms/iPhoneSimulator.platform/Developer/Applications/iPhone Simulator.app/Contents/MacOS/iPhone Simulator -SimulateApplication path_to_your_app/YourFavouriteApp.app/YourFavouriteApp
This will start up your application without any installation and works with iOS Simulator 4.2 at least. You cannot reach the home menu, though.
There are other unpublished command line parameters, like switching the SDK. Happy hunting for those...
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