I’ve seen a couple of posts on various sites over the last twelve months or so on how they think all applications will eventually become web based. This may (or may not) be true but i dont think it’ll happen anytime soon.
As Steve mentions certain applications just work better on the client side. His example of photo editing is a good one and video editing, 3d rendering, audio editing / conversion are just some examples i can think of off the top of my head.
Web applications will become more powerful as the Web continues to mature and bandwith increases but i believe rich client side applications are here for a long time