I almost uploaded my app, but read the following in the App Store guidelines:
iPhone Apps must also run on iPad without modification, at iPhone resolution, and at 2X iPhone 3GS resolution
I can't figure out what does it mean exactly so I would really appreciate if somebody could help me to choose the right way.
or
I tried both, and the layout looks much better on the iPad when it's not an universal app. Is it possible that I target the iPhone in the deployment info, but it's still works on the iPad? Do I need to do anything else?
You are not forced to make app universal, but you have to be sure that it will not crash on any device. This means that user can install you app on iPad too, use it, maybe with some restrictions, but it will not behave bad enough to be rejected by Apple testers in review. For example, you have a specific iPhone only option. User presses the button to use it and:
More than that - you need to avoid universal app to be sure compatibility mode will be used. If your app is universal, you should provide iPad support (resources, nib and so on) by yourself.
This question is also helpful.