One of my Christmas presents was Photoshop Lab Color: The Canyon Conundrum and Other Adventures in the Most Powerful Colorspace which, as it goes, has to be one of the longest book titles I have come across in a long time.
It's a long and detailed book that takes some reading, I found it was best to work through about two pages then work out what disk that comes with it was talking about with photoshop and the example disk that comes with it.
But once you get used to the LAB colour space and using the curves to modify it, then it does start to make a lot of sense. The book is cleanly written with lots of examples and the accompanying CD provides just the sort of example images you need to understand the concepts involved.
When would I use LAB? Well I'm only halfway through the book but the advantages seem to be that the LAB colour space separates contrast from colour information. Tweaking the curves (ohh listen to me, I didn't understand curves at all till I read the book!) allows you to boost contrast in areas that would normally be impossible in other ways.
The other use seems to be to provide a real differentiation on groups of similar colours, which would be very difficult to do in any other way, even with the raw processor.
A recommended read for those of you who really want to get into the guts of photoshop. Here is a quick "before and after", I've been playing with (click on the images to view large..it's quite subtle and only really works big):
Original after Raw conversion.
A minor LAB tweak later and Tower Bridge emerges from the gloom and the HMS Belfast has got its colour back. The changes were applied to the entire image yet the man's orange jacket and sign are unchanged.