This is a fairly standard tool for most graphic editors, and is especially useful when working with pixelart as it can be used to quickly select regions of colour with contiguous on, or every pixel of a chosen colour with contiguous off.
An example where this would be useful: I currently have trees sprites in my game with a shadow drawn into each sprite that I want to remove sprite. Using the magic wand, I could click on the colour of the shadow with a single click and press delete – completing the entire process in two clicks.
Currently, my choices are to use the eraser tool or copy the sprite into a separate editor, make the adjustment, and reimport - which is a pain.
Adding a magic wand would improve workflow within the editor considerably.