No list of free and low-cost tools is complete without mentioning Gimp. Gimp is like a free version of Adobe Photoshop, complete with the whole gamut of tools I can’t figure out how to use.
It’s downloadable and works in a whole bunch of platforms. I just read they now have a cool animation package as well. Again — all free.
GIMP – The GNU Image Manipulation Program.
Although I appreciate the coolness of Gimp, it’s really too advanced for my meager photo editing needs. Instead, I rely on Picnik.