I first saw this technique used to handle multiple "look and feels" when drawing widgets. You would ask the factory for a new scrollbar, it would consult a policy object, which would tell it what (available) class to use, and the factory would hand back a new instance of whatever type the policy object said to use.

I've also used a similar technique when building "plugin" mechanisms. At startup, the application reads and initializes a set of plugins, each of which inherits from Plugin. At initialization time, each plugin registers itself with Plugin. Plugin provides factory methods, a query method that hands back the names of all registered plugins, and a mapping of plugin name to plugin instance.