Software on Chrome OS comes in the form of a wide variety of “apps” that handle various needs, much like on an iPad, but with generally higher capability. At this time, you cannot run custom software such as, for example, photoshop, but there are very similar image editing apps available (such as Picnik, a powerful photo editor, and Pixlr Editor, a GIMP/Photoshop replacement for Chrome). In addition, there are apps that take care of audio-editing, video-editing, web-development, social networking, and office/productivity tasks.
The Chromebook is particularly well suited to playing casual games, including Flash games (which netbooks struggle with, and iPads are incapable of). There are currently over 1,700 games available for free. Example games include Angry Birds, the MMORPG Dead Frontier, simulation/tycoon games like Cityville and Burger Shop 2, and a wide variety of retro and arcade games such as Centipede, Super Mario Bros., and Tempest.