Is there anything you cannot do in a Web-based application? We have word processors, spreadsheets, and presentation programs running on the Web. There are drawing applications and even video editors. And now there's the beginning of a free-form graphics creation tool, LithaPaint.
Don't throw out your Photoshop license yet. The service is still in early alpha testing, a lot of it doesn't work, and most of the LithaPaint tools help you draw and manipulate lines, which is not enough; a more complete tool would also manipulate textures and areas. But it's interesting to experiment with, if only to see how much can be done inside a browser window.
There's one thing that we have yet to solve, though, with all of these applications: data interoperability. Currently, you cannot copy and paste between Web-based applications like you can with desktop apps. You can export documents from, and import to, most of the apps, but that's a kludge that takes us back to the early days of personal computing.