A. Neumaier said:
Yes, you are right. Thanks for pointing out my mistake.
Indeed, the section discusses the S-matrix in terms of the asymptotic fields, which are free by definition - one field for every bound state (see p.110 after (3.1.10).) Thus the situation is a bit more complicated than I had described before.
I'll correct my description later, after having figured out how to describe things more properly (which is not so easy since no textbook discusses this in simple terms).
Ignoring for simplicity infrared issues in case of massless particles,
the situation is the following:
In order to be able to talk about the S-matrix, one needs to have asymptotic 1-particle states whose tensor product describes the possible input to a scattering event. Clearly, we can prepare independently beams of any kind of free physical particles (elementary or bound states) in the theory and bring them to a collision. I'll call these particles asymptotic particles.
Thus, in QED, we can prepare photons, electrons, and positrons, which are the only asymptotic particles of the theory. In QCD, we can prepare mesons and baryons, but not quarks or gluons as - due to confinement -the latter are not asymptotic particles.
Weinberg now assumes (on p.110) that the unperturbed Hamiltonian describes the free motion of all these asymptotic particles, with their observable quantum numbers (mass, spin, charges). Asymptotic in-states are therefore elements of a Fock space generated from the asymptotic vacuum by means of free creation operators, one for each asymptotic particle species. These creation operators define the free quantum fields introduced on p.144 and used in the remainder of the chapter and in Chapter 4.
According to (3.1.8), the interaction is defined as the difference of the actual Hamiltonian and this free Hamiltonian.
There is, however, a difficulty that Weinberg does not directly discuss in the book: The asymptotic particles need not correspond one to one to the bare particles in which the Hamiltonian is derived from an action. This is most obvious in case of QCD, where the action involves quarks and gluons only, while the asymptotic particles are mesons and baryons. The assumptions break down, and perturbation theory is meaningless - a nonperturbative approach is called for, about which Weinberg is silent in Volume 1. He only says that the bound state problem is poorly solved in QFT (p.560), though with some trickery he is able to consider bound states for QED in an external field (needed to get the Lamb shift).
This breakdown of perturbation theory is the formal reason why low energy predictions from QCD are very hard - it is part of the unsolved confinement problem of QCD. (The derivation of effective actions for mesons on baryons from QCD is still a web of guesswork, with few hard results and much input of phenomenology in addition to intuition derived from QCD proper.)
Even in case of QED (and all other field theories without bound states), the problem remains that the masses of the asymptotic particles don't match the corresponding coefficients of the action from which the Hamiltonian is derived (the so-called bare masses and charges) - rather they are complicated functions of these, determined only as part of the solution process. The simplest instance of this is the anharmonic oscillator,
which can be viewed as a 1+0-dimensional quantum field theory. Here the mass corresponds to the difference between the first two eigenvalues, and this difference changes as a function of the interaction strength.
This is the origin of the need for renormalization. Renormalization is a technique for parameterizing the bare parameters as a function of the observable parameters (or parameters related to these in a fairly insensitive fashion). For my view on this, see
Renormalization without infinities - an elementary tutorial
http://arnold-neumaier.at/ms/ren.pdf
An additional problem in QFTs of dimension 1+d (d>0) is that perturbation theory is infinitely sensitive to changes in the bare parameters, leading to divergent integrals in second-order perturbation theory. Fortunately, renormalization cures this defect automatically, at the cost of making the bare parameters tend to infinity in a particular, fairly well-understood fashion. This was the breakthrough that earned Feynman, Tomonaga and Schwinger the Nobel prize. But the computations become quite technical...
Returning to Weinberg, it is fortunate that (because of the LSZ formula) the formal S-matrix contains essentially the same information as more rigorous approaches that work with the Wightman axioms. Therefore his derivations in Chapter 3 and 4 remain plausible (though not at the level of a mathematical proof) even in the face of the above difficulties. The main insight from Chapter 3.5 is the need for the causal commutation rules for the interaction density to get Lorentz invariance (which is not dependent on a particular representation of it in terms of the asymptotic Fock space), and from Chapter 4 hints for the particular structure of the interaction from the cluster decomposition principle.
The result is that one should represent the interaction as a Lorentz invariant scalar in terms of integrals over products of local field operators satisfying causal commutation relations and carrying an irreducible representation of the Poincare group. Chapter 5 describes the possibilities for the free part.
Interacting fields are introduced only in Chapter 7. Section 7.1 discusses the standard Hamiltonian approach in the instant form and the Schroedinger picture, and introduces in (7.1.28/29) the interacting field operators in the Heisenberg picture. Since in the instant form, space translations are implemented kinematically, these equations imply that
(1) ... A(x) = U(x) A_0 U(-x)
for all Operators A_0=F(Q,P), where - unlike in (3.5.12) - the translations U(x) are the physical (interacting) ones. Moreover, (7,1,27) defines the form of the free Lagrangian in terms of the physical parameters. As in the Hamiltonian case discussed in Chapter 3, the interaction is defined as the difference V=L_0-L where L is the full action (with bare parameters). The fact that bare and physical parameters are generally different leads to the observation that the so defined interaction automatically has counterterms (for QED, this is done on p.473).
Section 7.2 then reviews the construction of a Hamiltonian from the Lagrangian. Sections 7.3 and 7.4 verify that there is a unitary representation of the Poincare group in which P_0 is the interacting Hamiltonian defined in Section 7.2. The most important commutation relations (those needed to derive the Lorentz invariance of the S-matrix in Section 3.3) are verified on p.p. 316-317.
Finally, from (1) and the fact that the translations are part of an (interacting) unitary representation of the Poincare group, it is not difficult to show that one also gets the relations
(2) ... A(Lambda x) = U(Lambda) A(x) U(Lambda^{-1}),
which prove that the interacting quantum fields are Poincare-covariant with respect to the interacting representation of the Poincare group.
At various points in the developments of Chapter 3 and 7, Weinberg points out problems due to singularities at equal times, which may complicate matters (but not in Phi^4 theory or QED). These must be resolved on the basis of more detailed investigations involving the cohomology of the representations, and lead (sometimes) to anomalies, a quite advanced subject that doesn't alter the basic correctness of his analysis (on the level of rigor customary for theoretical physics) and the importance of his conclusions.