Gimp / Gimpshop The open source equivalent of Photoshop. This image editor is very powerful and completely free. Gimpshop [ available here ] is a modified version of Gimp to help people familiar with Adobe products move over to Gimp.
Inkscape A very powerful image creator that outputs SVG (scalable vector graphics) files.
Paint.NET Another image editor/creator that has some nice features. Basically this is a version of Paint with a bit of Photoshop style tools added to it.
Project Dogwaffle This is a free painting and animation prgram by Dan Ritchie. You can achieve nice digital paint results with this.
Picasa2 Google-owned Picasa is an image organizer. You can edit your photos, tag your images and even upload them to Google’s server for free. This is perfect for organzing images for galleries.