The new Balance system can be used to buy World of Warcraft game time (although you can't set up a recurring subscription with it), in-game pets and mounts, paid account services in WoW such as character transfers, digital copies of Blizzard titles, and the opportunity to buy and sell items on Diablo III's auction house. It's important to note that not all regions will be able to participate in Diablo III's real-money transactions, however.
Once real money has been funneled into Battle.net Balance, it cannot be converted back into cash. Blizzard does state that in some regions, players will have an option to get cash back on Diablo III auction sales via PayPal. The company also mentioned that there is a cap on how much any player can have in his or her Balance account and that there are potentially region-specific expiration dates for Balance funds.