Here’s a pretty slick module for Moodle that allows you to have students upload PDFs and then you can annotate and correct them with some in-browser tools before “handing” them back via the Moodle module. The module was created by Davo Smith (@davosmith).
Installation notes: on shared hosting (Bluehost.com) I did not need to install GhostScripts as suggested in the installation process on Moodle.org (however if you self-host you may need to install that capability).
You can download the module/plugin at http://moodle.org/mod/data/view.php?d=13&rid=2350
Here’s a video that highlights the process [direct link @YouTube],
Here’s what the module looks like when in use: