Photostream has a number of nice extras including the ability to lock a wallpaper, effectively freezing it in place, until you decide you would like to resume the automatic change function. There's also support for cropping of the current wallpaper, allowing you to optimise it for lockscreen usage, something that helps, at least somewhat, get round the curation issue we mentioned above.
The ability to use a local album as a source adds an extra dimension to the app. While most people will be interested in using Flickr as a never-ending source of constantly updated photos, using a local album allows for a potentially more controlled approach. For example, you could have a specific album in the Photos hub containing all your favourite wallpapers, essentially creating your own curated list of images, which Photostream will step through one-by-one.
Photostream is a free, ad-supported, app. However, the developer, Brandon Ayers, has included an option to buy an "ad-free upgrade" via an in-app purchase. We much prefer this method to having two separate apps in the Windows Phone Store (free / pro versions). Previously developers could opt to use Windows Phone's trial app functionality to offer a similar experience, but it meant an app would be categorised as a paid app, which had an impact on app store positioning and ranking.
Windows Store description:
Photostream allows you to set up photo sources from Flickr and your local albums as a live wallpaper. Setup Flickr's interesting photos, a favorite group, a keyword search, or your photostream as a live wallpaper source. You can also select your local albums as a photo source. Mix and match!
Photostream can be downloaded from the Windows Phone Store for free.