MacRumors.com

Apple's support document for PhotoBooth 1.0 indicates that PhotoBooth will work with an both an external video camera (such as an iSight) as well as the iMac's built in video camera.

PhotoBooth is a simple fun application which allows new iMac owners to take photos of themselves and apply various effects -- such as Sepia, Glow, Comic Book and more. The manipulated photos can be sent to friends by email or placed in your iPhoto Library.

For whatever reason, Apple is only offering PhotoBooth pre-installed on new iMacs, and has not yet released the software publicly. According to various reader reports, the 3.5mb application has no restrictions and does work on other Macs with an iSight (or other external video camera).