HTML5 <canvas> tag and a whole bunch of javascript. Full source code included - view source in your browser.
A startlingly simple and cool implementation. Just use it. 30 seconds after loading the site, this pic is saved to local machine.
Not a work of art. But not the point.
The point is that HTML5 expands the possibilities for webapps that are immediately capable, immediately useful, browser and web dev platform independent. Webapps that are light on system resources.
Tested cpu and memory consumption independently in each Opera, Firefox, and Safari on a 2.53 Core 2 CPU There was not even a perceptible blip in activity monitor while using the webapp. On a 1.5mb dsl connection, the interface worked in essentially real time, no world wide wait to see the results.
Very impressive. Stunning even. If this is HTML5, I want more, and soon.
Attempting similar activities on older macs using flash and a web browser is given as a pressing reason to upgrade hardware by Dan Knight over at Low End Mac. "For text and static images, my old Power Macs are fine. For streaming video, there's not a whole lot of difference, as bandwidth is the big factor there. But for websites that use Flash or JavaScript - the vast majority of the Web these days - the difference is huge."
The reasoning behind Jobs comments regarding Flash at the iPad intro are somewhat confirmed, at least in my mind.
Thanks to Kevin Purdy at Lifehacker for a nice webapp find..
http://lifehacker.com/5467493/sketchpad-is-a-no+flash+required-html5-painting-app