Unlike people have asked at here and here, I got this error after a brand new installation of Leopard (hackintosh), this problem really driving me crazy a
I had the same issue last night, and suddenly my system got reboot. At that moment, i was trying to install an application into simulator. When system returned, and i tried again to install the app, it said, "Failed to launch simulated application"
Than i did googled it, and tried many solutions, like cleaining all targets and try building again, but didn't worked out.
So i have found the following link, where it is described, how to reset the iPhone Simulator contents:
http://developer.apple.com/iphone/library/documentation/Xcode/Conceptual/iphone_development/125-Using_iPhone_Simulator/iphone_simulator_application.html
I tired doing it, and you guys would'nt believe me, it worked :) ,
Solution was : "To set the user content and settings of the simulator to their factory state and remove the applications you have installed, choose iPhone Simulator > Reset Content and Settings"
Best of Luck to all.............. :)