In short, colour profiles embed colour information from image capture devices (digital cameras, scanners, etc.) that allow output devices (monitors, printers, etc.) to accurately reproduce colours when outputting an image. I won't go into too much detail as to why this is important, there are number of articles like http://www.dria.org/wordpress/archives/2008/04/29/633/ and http://gearoracle.com/guides/web-browser-color-management-guide/ that explain this better than I can, with examples.
The use case for us specifically is in a photo sharing application where we want to allow clients to upload images pulled directly from their digital camera, images which are usually tagged with the camera's ICC profile. We are currently performing server-side image resizing using ImageMagick which allows us to preserve embedded colour profiles. Colours tend to look "washed out" when colour profiles have been stripped. As another similar example, Flickr's server-side image resizing also retains colour profiles (and would I surmise most other photo management/sharing sites do as well).
Most of the major browsers support colour profiles when displaying images -- specifically, Safari and Firefox do, and IE 9 supposedly does, while Chrome, Opera, and older versions of IE currently do not.
The format for embedding ICC profiles in JPEG images (in the APP2 segment) is described in the ICC specification: http://www.color.org/icc_specs2.xalter
I may end up implementing this in plupload myself within the next few weeks, time permitting, but wanted to check here first in case someone else already had something in the works.