To start simply, the answer is “It is used for still photography!” I’ll explain a little more in a bit, and its use is fairly niche at the moment.
The roots of xvYCC
The xvYCC encoding is, as far as I can tell, a modern enhancement to YCC encoding, or in its long form, Y’CbCr (or YCbCr, which is slightly different.) The YCC encoding is part of a family of luminance/chrominance color spaces, which are all largely rooted in the Lab* (‘Lab’ for short) color space formulated by CIE back in the 1930’s. The Lab color space is also a Luminance/Chrominance color space, wherein the luminance of a color is encoded in the L* value, while two chrominance axes of a color are encoded in the a* and b* values. The a* value encodes one half of the chrominance along the green/magenta axis, while the b* value encodes the other half of the chrominance along the blue/yellow axis. These two color axes were chosen to mimic and represent the four color primary sensitivities of the human eye, which also lie along a red/green and blue/yellow pair of axes (although true human eyesight involves a double-peak red curve, with the smaller peak occurring in the middle of the blue curve, which actually means the human eye is directly sensitive to magenta, not red…hence the green/magenta axis in Lab.)
The YUV Encoding
Y’CbCr is probably most prominently recognized in the form of YUV video encoding. The YUV encoding was specifically designed to reduce the amount of space necessary to encode color for video transmission, back in the days when bandwidth was a rather scarce commodity. Transmitting color information as RGB triplets is wasteful, since R,G,B triplets encode color with a fair amount of redundancy: all three components include luminance information as well as chrominance information, and luminance is weighted across all three components. YUV is a low-bandwidth form of Y’CbCr luminance/chrominance color encoding that does not have the wasteful redundancy of RGB encoding. YUV can consume anywhere from 2/3 down to 1/4 the bandwidth of a full RGB signal depending on the subsampling format (and, additionally, it stored the full detail image in the distinct luminance channel Y, which conveniently supported both B&W as well as Color TV signals with a single encoding format.) It should be clearly noted that YCC is not really a color space, rather it is a way of encoding RGB color information. I think a more accurate term would be a color model than a color space, and the term color model can be applied to both RGB and YUV.
From the reference linked in the original question, it appears that xvYCC is an enhanced form of Y’CbCr encoding that stores encoded luminance/chrominance color information with more bits than YUV. Instead of encoding luminance and chrominance in interleaved sets of 2-4 bits, xvYCC encodes color in modern 10-bit values.
Use in Still Photography
Intriguingly enough, there is one DSLR camera brand that does use something very similar. Canon added a new RAW format to their cameras in recent years, called sRAW. While a normal RAW image contains a direct bayer dump of full sensor data, sRAW is actually not a true RAW image format. The sRAW format does not contain bayer data, it contains processed Y’CbCr content interpolated from the underlying bayer RGBG pixel data. Similar to the TV days, sRAW aims to use more original signal information to encode luminance and chrominance data in a high precision (14-bpc), but space-saving, image format. An sRAW image can be anywhere from 40-60% the size of a RAW image, and the gains are realized by a similar interleaving and sharing of luminance information amongst multiple chrominance pairs (similar to how RGBG bayer pixels are shared to generate actual RGB pixels.)
The benefit of sRAW is that you maintain high human-perceptual color accuracy in a compact file format, and make better use of the RGBG pixels on the bayer sensor (rather than overlapped sampling that produces nasty color moire, sRAW performs non-overlapped chrominance sampling and overlapped/distributed luminance sampling.) The drawback is that it is not a true RAW format, and color information is interpolated and downsampled from the full bayer sensor. If you do not need the full RAW resolution of the camera (i.e. you only intend to print at 8×10 or 11×16), then sRAW can be a real benefit, as it can save a lot on space (as much as 60% savings over RAW), it saves faster than raw providing a higher frame rate, and makes better use of color information captured by the sensor than full resolution RAW.