It allows a variable degree of transpareny insted of the simple mask used before. Currently Select Paint is the only application capable of handling that format properly.
The point with the imagefile system is that every application can use it and therefore understand all the imageformats supported by that system. Currently Paint,Draw,the Pinboard and the filer (thumbnail) use it.
I use it mainly from the commandline to convert say a directory of images without having to worry about imageformats.