If the picture's main purpose is to showcase the app design (like the example you've given), the standard approach is to Photoshop the screenshot on afterwards. Bear in mind though that a screenshot may be quite low-resolution compared to a multi-megapixel photo so it can be difficult to get a very high-res version of the composite picture that still looks sharp.

However, it is possible to get pretty decent publicity shots showing the software running on-device with no Photoshopping. Here are a couple of examples I did for a client some years ago:

Here are some tips I learned while trying to get those shots right:

1. Soft ambient light is best. There was no artificial light involved in those shots at all. They were taken in a large, airy atrium of an office building, so there was plenty of daylight but no direct sunlight or spotlights.

2. Use a smallish aperture so the whole screen is in focus, and keep the background as distant as possible so it's still nicely blurred. These were actually both taken at f/4 which is just about OK, but if you look closely the corners of the screen are out of focus. Given a second chance I'd use something like f/5.6 - f/8.

3. Turn down the screen brightness: an overly bright screen will always end up over-exposed when you're metering for the hand. Experiment with this to get it right.

4. This is the big one: use a large black card or the black side of one of those reversible reflector discs to eliminate reflections. However I posed these shots in the atrium, there was a window reflected in the screen, so I got an assistant to hold a large black reflector between the window and the phone and bingo - no reflections!

5. Have some screen wipes handy to clean the screen beforehand so dust and fingerprints don't ruin the shots.

6. Oh, and make sure your model has clean fingernails. :)