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I belive you are correct in this, but if it's as you suggest couldn't the same be accomplished just using a masking layer, and why wouldn't you?

Acctually I've tried to get this question answered for a few days and I started out at the adobe forums for beginner as you can see in the below link. I've quoted the particular post that got me puzzled. Perhaps you guys understand better what he meant.

"If I understand what your after. Paths in that case were used to create a bounding box for page layouts. Allowing the text to flow around the object in the image rather than the outside edge of the image. Giving the the text a curved look.

Today some page layout programs are capable of detecting the edges of objects or will let you alter the text frame similar to how a vector rectangle could be altered."

Silkrooster

Adobe Forums Why would you add paths to a jpeg?