Is IAP tied to the device or the iTunes account?

It's tied to the iTunes account. Well, at least I think so. I downloaded the MC2 update with my iTunes account on my iPhone, then I accidentally deleted it (don't ask how), so I re-downloaded it and hit the 'Restore Purchase' button.

It prompted me for my iTunes account information and boom, I had the maps again.

 

From what I understand, content is tied to your account. IAP such as in game gold or money or anything like that, however, is not and cannot be restored.

 

Yep. It definitely works-- worked for Command and Conquer IAP on my other device, and same for Pocket God--

 

Agreed, this is how it seems to work. I have multiple devices and standard IAP is tied to the account and can be restored/downloaded to any system. The IAP which are of the one time in game items can't be restored.

To be clear, when I say standard IAP I am referring to games that allow you to buy levels or the full game within a game.

 

In-app purchases *can* be restored. For example, but it may be dependent on the game/app in question offering a "Restore purchases" option, or whatever it's called. I'm not sure, but my in-app purchases have been restorable on multiple devices. One exception was Pilot Wings, but that may not really have been an in-app purchase because the dev gave me a special unlock code that you entered in the game itself. That may be it's own thing and just for that special case. I'm not sure.

Case in point: Atari Arcade Classics or whatever it's called. I bought the full collection unlock on my iPhone and was able to restore the purchase on my new iPad 2. Worked without a hitch.

 

I think devs can tie the IAP to a device even for content if they wish. I might be wrong but from what I've heard, angry birds Eagle IAP is tied to the device you bought it from.