LSB encoding using a PRNG order is a common way to do steganography, but it’s usually pretty easy to detect. Statistically, an image with LSB encoding will look different than one without it if you’re looking at the distribution of bits across the image.

The goal of the steganography isn’t to replace encryption though. For example, if Alice and Bob are criminals and Alice gets busted, it would definitely look suspicious if someone saw Alice sent Bob a bunch of encrypted messages. They might not be able to figure out what the messages contained, but they don’t need to know in order to start investigating Bob anyway.

Instead though, what if Alice just posted a picture to social media. Nothing about it looks weird, it’s just a regular social media post. Maybe the steganography is detectable if you’re already looking, but it isn’t weird enough to get someone to start looking at it on its own. But…Bob knows there’s a message encoded in that image and how to extract it. So Alice still gets caught eventually for some other reason, but there’s nothing actually connecting her to Bob. She didn’t send anything directly to him, it’s just an image that’s out there where anyone can see it. But Bob still got the message, and was the only one who did. Maybe the police go back now and analyze Alice’s pictures and see exactly which ones had a message encoded onto them, but they still can’t tell what the message was or who it was for.