Depending on where you put it (what kind of venue?) it could work
very well. Many of the larger department stores (Sears,WalMart) have
similar setups,although I don't know if they print on the spot, but
they could..
I even saw one set up at a card shop next to the Baseball Hall of Fame
in Cooperstown... you and the family go in, put on official baseball
uniforms and stand infront of background baseball scenes.
Usually it involves using a high end digital camera and a fast
computer and high res printer. I've seen then using digital backs for
medium format cameras, one used a Polaroid 8x10 camera. I've seen Fuji
printers, Scitex, Kodak dye subs.. there's lots of choices. Also, you
can use pre made templates to drop the subjects into other scenes.
Most of the setups I've seen used Mac computers, although I've seen
them on PCs too.