I have read about how I can actually drag something from the desktop (from the operating system) to a html5 web page and it can “know” about what I am throwing at it. For example imgur for images. What other ways of interaction between html5 and a system exist.
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Not a lot. Any interaction such as the one you’ve mentioned are those which are initiated by the user. For instance the FileReader API can only read files that the user has selected/dragged.
This is to keep the browser sandboxed so that malicious websites can not tamper with one’s machine or files. However html5 gives you:
Geo-location Api lets you physically locate you’re machine.
Local Storage is another new feature of html5 which lets you store a small amount of data on the user’s machine. It’s different from Cookies in that it has a larger space than cookies and the data isn’t sent back to the server with every request.