I am looking at http://mugtug.com/darkroom in firebug and it's one big canvas element. Pretty impressive! Kind of what bespin did with the creating a code editor, these guys did with creating web based Photoshop.
To my disappointment, the performance seems to be not quite there yet. This has nothing to do with the code, but the browser is perhaps not ready yet to do this type of image processing. When I uploaded a little large image, and tried to do some color adjustments, I had to wait seconds till something happened, freezing the screen rather than getting a wait sign.
Anyway, this app proves that the future for HTML5 looks pretty exciting. In the code I even see some signs that "tough events" are supported, opening a whole new market for rich internet tablet apps.