This is pretty good. it reminds me of ArtPad's on-line canvas game from a few years back. Adding the element of multiplayer changes it from a fun tool to display one's art into an innovative feature that could push the less participatory among us to creators. The limited tools force people to be creative when drawing, and by showing how people draw their pieces, it allows people to learn the techniques of others.
As a suggestion, I strongly recommend there be a transparency option, where one could select a color and have it be varying degrees of translucent depending on the settings. For me, this would make the difference between "good" and "this is great."