Recent advances in optical phase conjugation and energy coupling at optical powers as low as a few milliwatts have added a new dimension to optical image processing. Conventional image processing techniques based on convolution/correlation, matched filtering, and holographic interferometry can now be achieved with much simpler components and usually at much higher efficiency by incorporating these new features. Some of the application concepts that had been impracticable can now be realized. The basic principle and potential industrial applications of real-time image subtraction using dynamic holograms are reviewed. Optical implementations and experimental results on image subtraction, novelty filtering, and defect detection are discussed.