That restore option is very useful. I've made use of it on several occasions when re-downloading an app with in-app purchases that I've already paid for.Just as an update to the above, iTunes support told me that my first purchase of the app was for the in-app purchase and the second purchase was for the full version). They refunded me $1.99 + tax for one of these two.
On Wednesday, I discovered that another app that I had purchased last year was again showing advertisements and requiring me to repurchase it for $9.99. However, there was a Restore button that, after tapping, allowed me to use the app without the advertisements.