HTML5 promises a number of interesting improvements that will allow even more engaging web apps. One of these is the canvas element, which allows programmers to draw or process images using JavaScript. This article lists the top most interesting canvas applications and demos that I have found:

Rippling Water Cavas Demo

In this demo a beautiful rippling water effect is drawn using the HTML 5 canvas element. The ripples can be triggered using the mouse to drag or click. Unfortunately this demo is a little slow. On my Macbook it ran at only 5 FPS in both Safari and Google Chrome.
8-Bit Palette Color Cycling Canvas Demo

This very impressive canvas demo reimplements a trick used in the days of 256 color palettes in video games. Because these graphical effects were designed to run on very slow early computers they run excellently in the canvas element. The demo has a nice set of options such as zoom and blending mode adjustments.
Online Collage Generator Implemented in Canvas

This canvas demo is a web app that helps you create an online collage. You can search for images to include and then adjust their rotation, shadows, and placement above another backdrop image.
HTML 5 and Canvas Sketchpad Web Application

This impressive online painting and drawing application has the potential to be an online Photoshop. The interface is very well designed and the drawing canvas is fast and responsive to input and brush strokes.