Enter the URL, and you will see the collection appear as a photo album in the left sidebar (just like a .Mac Photocast). Now, go to System Preferences » Desktop and Screen Saver (or right-click on the desktop and choose Change Desktop Background). Scroll down until you see the name of the subscribed account and select it. You will see the photos from Flickr, and you can now select your favorite image! iPhoto does not need to be open to access the images, but it does need to open at least once to update the image collection. Enjoy!
Note: Currently, OS X does not support the Change Picture and random select features for iPhoto albums, but I hope to find a way around this soon. Also, image resolution depends on the source image, so be prepared for some pixelation if the source is of low quality.

