Great if you actually have someone to talk to!!
The downside, of course, is finding friends with the DS, then sitting close enough to them to use this. I think you have to be within 30 feet. Seriously...thirty feet!! If you're that close, why not just talk?? Or play Mario Kart DS, which is what I've done with my friend. It's a lot more fun.
If PictoChat could reach greater distances, the potential would be amazingly high. Even if it got within 100 feet, it would be a vast improvement. But now, why not use a pen and paper? Or a cell phone, if you get free text messages?
The only time this might be good is if you are at an event with a friend, like a lecture or something, and they're not sitting with you, and you and she can chat without the speaker noticing. But even then, the screen's big enough so that everyone sitting around you will know what you're writing, and you might miss the lecture.
All in all, great idea for an app. It's just not great enough. But it did make for a fantastic level in Super Smash Brothers Brawl!!