Cross domain canonical linking now possible
Although cross-domain canonical linking is now possible it was originally introduced to overcome the problem of duplicate content on one domain.
Duplicate content is a topical issue particularly in light of the recent Google Panda algorithm update ostensibly designed to weed out content duplication sites of low quality.
It was originally introduced to standardise content on a single domain and its sub-domain(s). The problem was that the same page could be referenced in a number of different ways eg
It might be surprising but search engines would see all the above as possible different pages, indexing individually and as such reducing the pages search visibility, effectively splitting its pagerank/authority six ways. Not good from an SEO perspective.
The canonical element enables you to specify your preferred master page for search engine indexing.
Matt Cutts explains in this video:
Being able to specify a master page is also important in the world of ecommerce
Often products can appear in more than one category, justifiably in most cases, and as such have many different url paths to the same product page.
The problem is further increased in the case of ecommerce sites where the same page could be landed on in far more ways due to the way the product can be added and referenced both in multiple categories, by search parameters such as colour, size, weight with each even possibly with an individual session id included or where, in the case of a category page, there are hundreds of products able to be paged through, each page adding a parameter to the page name.
Setting a canonical link on the product page will help SEO efforts in pointing all the various urls to the same location benefitting both external and internal SEO activity.
Although welcome the cross-domain canonical support will only be effective in situations where the site duplicating another sites content adds the canonical link to give first publisher acknowledgement.
Most sites that copy and add duplicate content do so for their own benefit and are unlikely to add a canonical link which would effectively nullify it!