I've been using Green Screen by Do Ink to create a background for my classes performances using finger puppets. Gren Screen has been around for a while but has been expensive until quite recently. This app costs just £1.99 but achieves great results.
In their own words;
Green Screen by Do Ink makes it easy to create incredible green screen videos right on your iPad. Classroom-tested by kids and teachers, this app emphasizes ease-of-use and simplicity while still enabling you to get fantastic results. With Green Screen by Do Ink, you can tell a story, explain an idea, and express yourself in truly creative and unique ways.