Android antipiracy measures are extremely brittle and rely on server-side verification, this has been circumvented by decompiling app archives, patching them and rebuilding them, which is entirely possible using apktool or your decompiler of choice. Frankly im surprised that the platform isnt crawling with malware.
And yes, any antipiracy mechanism can be circumvented. That said, 90+% of android users probably dont have the knowhow to grab the apk, decompile it, and remove the server side check. And I'm not sure on this last bit, but I know at least in the US some carriers (ATT) disable installing apps that aren't from the appstore. I haven't read about the details of the antipiracy mechanism, so I can't really say more than that.
Also, its unclear to me if you're linking the fact that theyre so easily decompiled/cracked and that you're surprised it isnt crawling with malware.
a)the Wired article that says 70% are still on 1.5/6 is from 9 months ago. Figures from November 2010 indicate that 75% of users are running 2.1/2.2: http://gizmodo.com/5679410/over-70-of-android-phones-are-now...
b) Google has since implemented some antipiracy measures on the app store.I'm less certain about its details/market penetration, but it exists in some form
c) android now has a lot more than 10 million handsets.