You’d first fill up your iPhone with credits using the device information pane in iTunes…

When buying an iPhone app from App Store or a song via iTunes Music Store, a network connection is required – not only to deliver purchases, but also to process payments using your credit card on file or iTunes Store credits. That could change in the not-so-distant future as Apple lays out in excruciating detail a system allowing for on-device offline purchases of digital warez. Ruling out real-time credit card transactions for obvious reasons, Apple proposes storing iTunes credits (currently obtainable as iTunes Gift Cards) on the device itself. This, in turn, will be your primary mean of payment while offline. Your device would sync settled offline purchases made offline with a remote payment processing entity (iTunes Store) when you are back online to ensure your account balance is up-to-date:

There’s only one problem with this invention, credited to engineer Taido Nakajima – you’d still need a network connection in order to download stuff bought offline. Don’t worry, Apple thought of that, too…

A storefront program – in this case the iOS iTunes app – would label locally cached and restricted content and let you both purchase and immediately consume items, even offline.

 

In Layman’s terms, a device would locally cache media items not yet owned by the user and restrict access until they are purchased, either online or offline. With an on-device offline purchase the system would deduct the cost of the item bought from the locally stored credits and unlock the item for consumption. The entire App Store catalog with meta data could be cached, Apple explains, allowing you to browse and discover apps while offline. Furthermore, “one or more recommended media items” could be cached so you could in theory buy those items and immediately begin enjoying them without a network connection. Items bought offline but not cached on the device could be transferred to the user’s media library “at any suitable time”:

Apple, of course, runs iTunes Genius, a cloud-based recommendation engine that analyzes your past purchases and habits of the millions of people who opt-in to Genius. To retrieve more information about Apple’s patent application, enter the ID 20110178896 into the USPTO search engine.

Upon using up all credits stored on the device, you’d be reminded to purchase more iTunes credits online.