Google is shutting down Picnik soon, so everyone is looking for an alternative for online image editing.
Aviary offers a suite of online image services that include screen capture, image editing and much more. It's free to use and very powerful. Read more here: Aviary image tools
Paint.net is not online, but it is a free download that is easy to use and extremely powerful tool for Windows. It has layers, special effects and much more and the keyboard shortcuts make it very fast to use.
iPiccy is a service I just learned about from Steve Dembo over at Discovery Education. iPiccy requires no login, is easy to use, and has tons of features. You can upload pictures, enter a URL to a picture or import a picture.
So, even though Picnik is going away, there are some great, free options for image editing.