Not all applications accept stylus input. For example, some note taking applications, like OneNote, only take touch input to control the application and depend on the virtual keyboard for character input.
There are some applications that can be downloaded from Google Play that recognize stylus input for freehand annotation, character recognition, or shape recognition. Examples of this include Stylus Labs Write, Adobe Reader, MyScript Notes Mobile, and DrawExpress Diagram. (This is only a subset of applications that use stylus input in this manner.)
Tegra NOTE does not ship with a character recognition input method to replace the virtual keyboard. However, Tegra NOTE does facilitate text input on the virtual keyboard by recognizing gestures more accurately than when they are entered with a finger.