The 1.2 and earlier versions of ZotPad use the built-in QuickLook viewer that can open a large number of file types, but has limited features. Most notable, the file viewer cannot search PDF files and cannot display annotations. These limitations can be avoided by sending the file to a third party PDF reader using the action button.
In the future, ZotPad will include a better PDF viewer. There are a number of commercial PDF libraries that can show annotations and support searching. The main reason for not using one in the first version is that these are fairly expensive and are more difficult to integrate than the QuickLook viewer. The current plan is to integrate the iAnnotate PDF library in the version 1.3, but this is not a firm commitment yet. You can read more about the plans for integrating a better PDF viewer here.