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I was looking at Decoded cases and the photos used on the site right now show the large camera cut out.
 
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It's usually when I'm at home, and my iPhone is upstairs on charge and my children are doing something lovely/funny that I want to capture. iPad is frequently in the living room or kitchen and therefore to hand. If I went to fetch the iPhone, I'd miss the moment :)
This. There's a long-standing saying: "the best camera is the one you have with you".

There is also the situation where rather than a random person using it in preference to an iPhone for snapshots, it's being used instead of a phone with purposeful intent. If you're using it in conjunction with an app already on the iPad (someone was mentioning a guest sign-in app earlier), or if, say, you're doing something where a really huge viewfinder would be a big help (e.g. shooting a movie). With a really great camera on the iPad, you could shoot and edit a movie entirely on the one device (no, I'm not suggesting Hollywood is going to convert over to iPads).
 
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