Hi Nikhil,
Our free quota is available to everyone, regardless of what you're using your app for - indeed, there's no way for you to turn it off! And writing commercial apps on App Engine is both permitted and encouraged.
Bear in mind that you may want to enable billing even if you set a very low limit - some limits are increased simply for having billing enabled, without necessarily spending any money on them.
And if you build something cool (and public), please don't hesitate to point it out to us.
-Nick Johnson