Apple has discouraged developers from annotating their screenshots in the App Store beyond just a plain screenshot. However many developers have found that it’s helpful (and profitable) to tell a story with their screenshots, explaining the main benefits of the app. And I have yet to hear of any app rejections due to annotated screenshots.
With the introduction of the Apple Store for iPad app, Apple decided to go with annotated screenshots for on of their own apps for the first time. They did it in an interesting, and unusual way, by showing an image of an iPad running the app below a headline that explains the benefit or feature shown in each screenshot.
You could argue that the UI of an app should be so self explanatory that a quick look at a screenshot conveys all the information you need to know about the app. But I think it can be very beneficial to use annotated screenshots in the App Store, when they’re done in a tasteful way. However, I wouldn’t use Apple’s approach of displaying the outline of the iPhone or iPad device as this takes up way too much real estate in the screenshot. And it also opens up a big minefield that you have to navigate when you use images of Apple’s products in your marketing. See the first link above for more details.