Steganography has its place in security. It is not intended to replace cryptography but supplement it. Hiding a message with steganography methods reduces the chance of a message being detected. However, if that message is also encrypted, if discovered, it must also be cracked (yet another layer of protection).
There are an infinite number of steganography applications. This paper explores a tiny fraction of the art of steganography. It goes well beyond simply embedding text in an image. Steganography does not only pertain to digital images but also to other media (files such as voice, other text and binaries; other media such as communication channels, the list can go on and on). Consider the following example:
A person has a cassette tape of Pink Floyd's "The Wall." The plans of a Top Secret project (e.g., device, aircraft, covert operation) are embedded, using some steganographic method, on that tape. Since the alterations of the "expected contents" cannot be detected, (especially by human ears and probably not easily so by digital means) these plans can cross borders and trade hands undetected. How do you detect which recording has the message?
This is a trivial (and incomplete) example, but it goes far beyond simple image encoding in an image with homogeneous regions. Part of secrecy is selecting the proper mechanisms. Consider encoding using an Mandelbrot image [Hastur].
In and of itself, steganography is not a good solution to secrecy, but neither is simple substitution and short block permutation for encryption. But if these methods are combined, you have much stronger encryption routines (methods).
For example (again over simplified): If a message is encrypted using substitution (substituting one alphabet with another), permute the message (shuffle the text) and apply a substitution again, then the encrypted ciphertext is more secure than using only substitution or only permutation. NOW, if the ciphertext is embedded in an [image, video, voice, etc.] it is even more secure. If an encrypted message is intercepted, the interceptor knows the text is an encrypted message. With steganography, the interceptor may not know the object contains a message.