Can iSight be used by more than 1 application at the same time?
The simple answer is no - in general the one camera only sends data to one app.

The more complicated answer is that the API (application programming interface) that Apple publishes enforces this restriction. If a developer hooks into the hardware directly or there is a bug in the API, it is possible to share that stream.

So for most Apps made by someone other than Apple, once the iSight is in use by one application, it is unavailable to other applications until the application releases the use of it or the application closes. User Gentmatt rightly points out that this is not the case for Facetime and Photobooth, where Apple is either using an undocumented or private API or accessing the hardware directly so that both apps can share the camera feed.