The "data" URI scheme has been around forever, however IE7 (effectively the only browser ever to *not* support it) dropped support for it years ago, which has pushed its use into obscurity. My hope is that with IE8 bringing back support for it, its use can proliferate.
Over the past few years little graphic droplets have sprinkled web pages like a fine mist. From favicons, to "share this" links, to RSS broadcast icons, to..... the list goes on and on. Just pick your favorite website and see the dozens of little graphical tidbits. Here are a couple that come to mind.
The trade-off between the bytes transfered for the image data, versus those in the HTTP request/response exchange is often a wash for these kinds of images. The real optimization comes from the elimination of latency in the system. For many blogs, the number of HTTP requests for these specs of image data can be reduced by the dozens; that's a huge win! Often, entire page layout/rendering can be blocked on these little images.