I believe you can only do the online process once you've already had a passport and the initial passport is issued by the "traditional" means of showing up in person.

Replacements and renewals can be done entirely online because of facial biometrics (to compare the previous passport photograph with the new one and to see if the new picture may be used elsewhere) and digitization of other records for internal comparisons.

ABC (Australia) has an interesting video on Youtube describing the process.

I renewed my US passport last year and that was entirely done through the mail. Why is uploading a photo inherently less secure than mailing a photo?

I was under the impression that you had to have your photo taken at the post office. In the case where you've already provided verifying documentation, having that official also take the picture neatly verifies the picture at the time of the application.

I just looked, and apply by mail is only available in certain situations, one of which is that it must be a renewal, and the prior on must have been within the last 15 years and you must have been over 16. It sort of makes sense with those rules, but still seems somewhat lax to me.