So in pick-pocketing, you have the option to steal from somebody's inventory, and/or place something into it. Outside of leveling exploits and quests, what function does placing actually have? Can you use for stealth kills or something?
Yes, you can poison people by placing poison into their inventory.
Reverse pickpocketing a poison using the Poisoned perk does not count as a crime, even if the magical effect of the poison (e.g. "damage health") would otherwise be considered a criminal act if applied any other way. This makes it entirely possible to kill or weaken innocent enemies, right in front of everyone, without incurring a bounty (unless you get caught, as noted @Kevin).
Also, reverse pickpocketing a paralysing poison into your target's inventory and then pickpocketing them as soon as the effect starts to wear off allows you to take any item without being caught, no matter the chance of success.
If you reverse-pickpocket equippable items, the NPC may equip them. This is useful if you have an unarmed follower who refuses to trade with you, like Maurice Jondrelle, who appears in the Blessings of Nature quest. If you reverse-pickpocket a sword and some armor to him, he has a better chance of surviving the quest.
For that particular NPC, the Elder Scrolls Wiki says that you have to reverse-pickpocket him before you talk to him for the first time, or it won’t work.
You can use this to drop poison into their pockets and stealthy kill/damage them, but only if you have the poisoned perk in the pickpocket perk tree.
see here for a description of the perk
I would like to stress upon the "pickpocketing someone while the paralysis effect has just been weared off for anything(as mentioned by @Exerion)" a bit more:
Since Alchemy is quite hard to level up. Whenever my player levelled up, I used to go to an Alchemy trainer, train 5 levels, and steal the money. But, as my level grew in Alchemy, the chances of stealing large amounts became 0 no matter what i did(tried all sorts of potions and stuff). And then I thought of an IDEA. I put a paralysis potion in the trainer's pocket and as soon as the stealing option became enabled, I stole my money back successfully.
Also levelled up other skills like Archery, Enchanting, Smithing etc the same way. It saved me a fortune(hundreds of thousands).
If you reverse pickpocket gold onto a merchant immediately after investing in them, you can increase the investment permanently. There seems to be a 16 bit limit in place where raising a merchant's gold much past 32,500 will cause it to freeze. You can sell items, but won't receive gold in return. Also, it may be wise to reverse pickpocket multiple smaller amounts so you are less likely to get caught.