The only real use case for this is as a watermarking tool that the end user uses to place his own watermark on his own images and as has been mentioned could provide a pre-composited file generated on the client to the server for later public consumption.

Of course, this doesn't prevent the user uploading an image that they don't have the rights to and watermarking it as if it was their own... that's a whole other subject.

But it's a good demonstration of the capabilities available in modern browsers :)