Glu Mobile, a publicly-traded mobile gaming company that specializes in freemium games, raised its second-quarter earnings guidance by a range of $500,000 to $1 million and said going forward, it’s not accounting for revenue from incentivized installs.

The company said that smartphone gaming revenue will come in at between $8.25 and $8.75 million this quarter, up from the $7.25 to $8.25 million range it forecasted in its earnings call a few weeks ago. It says $2.9 million of that will come from incentivized installs, where users download apps from an offer wall in exchange for virtual currency inside a game. This revenue has already been transacted, and the company isn’t counting incentivized install revenue going forward.

Glu said it will probably be able to make up for 50 to 75 percent of the revenue lost from offer walls through other kinds of incentivized actions in games — like getting users to watch video ads in exchange for virtual currency.

This is a big deal because Glu — which is in the midst of a dramatic transition from feature phone to smartphone revenue — made a huge bet on freemium gaming and revenue from offer walls. They have been one of the biggest partners to pay-per-install networks like Tapjoy and Flurry.

This practice came under fire in April when Apple began cracking down on incentivized installs, viewing them as a way to game rankings inside the app store. A widespread practice among developers through the first quarter of the year was to pay for installs from these offer walls and buy enough to break into the top of free charts and gain visibility in front of a large number of consumers. Apple began rejecting updates and new apps containing these kinds of offer walls in April.

Now that one of biggest proponents of this model is writing it off, other developers are likely to follow suit — which means that the biggest networks for incentivized downloads are probably in rapid decline. Glu is still working with many of these partners on other types of advertising, however.

Google’s Android Market has not made a similar move, but revenue from incentivized installs on this platform is negligible. Glu said yesterday it probably will amount to a few hundred thousand dollars for the quarter.

All of this uncertainty hasn’t hurt the price of Glu’s shares. The company was an unanticipated beneficiary of rumors about a forthcoming Zynga IPO, which raised investor interest in other companies that monetize their users through virtual goods. Its stock rose to a 52-week high of $5.44 today, from $1.27 a year ago.

We’ve excerpted some of the most interesting charts from an investor presentation yesterday.

Here’s updated earnings guidance:

Here’s more basics on Glu’s current market capitalization and cash on hand:

Here’s how their balance sheet has improved over the last year:

Here’s a basic primer explaining revenue breakdown from a mobile freemium business model:

Here’s how Glu’s revenue from freemium gaming is doing:

Here’s what the overall picture looks like for smartphone revenue:

Here’s how their monthly active and daily active user base is doing:

Here’s growth in new users. Glu says the figures look stagnant from the fourth quarter to the first quarter because it released most of its major games in the last few days of the first quarter (which means those additional users wouldn’t show up in these statistics).

Here’s how their big hit, Gun Bros, performed in the first quarter: