Or we could write "thumbnail babes.jpg" and it renders it directly in the terminal instead of popping up another window.

Or if I'm wanting to do some scripted image editing it'd be pleasant to be able to render images directly into my terminal as I work out the specifics of my task. As opposed to writing to temp files and then viewing them with a separate viewer.

Personally though what I want from a terminal emulator is something integrating into SSH which creates an out of band channel from the remote end of my ssh session to the terminal emulator. This way I don't have to play stupid games with shell prompts and the like, programs could literally know that a data path to my screen is available and do things like change background colors if I've changed users. Messing around with prompts and shoehorning too much stuff into escape sequences is awkward.