A lot of replies are missing the point. It's not "apps integrate better with each other". It is "there are no apps". So what would Adobe sell, if not the "Photoshop app"? It would sell the Photoshop "menu of filters", the "selector toolbox", the "color histogram view" and such. But the workspace where you see the image and apply the selectors or filters would be outside Photoshop itself. It would be a standard part o…
It turned out to be absolutely horrible. Maybe it was before it's time with computers having only a few meg of memory and being slower than today but it seemed more of an issue because things like UI, when you click the embedded document, what should happen? How much of photoshop's ui should be shown vs Word's (the outer app). It was also a nightmare because unless every user had the exact same apps on the exact same version nothing worked.
Your embedded photo uses filter XYZ but that's only in version 7+ of whatever app edited it, etc...