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Pixlr is a great free photo editing online application.
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How to Retouch Photos using Pixlr

Photoshop is great...don't get me wrong. Like most web professionals, Bower Web Solutions' designers spend hours during the average day using Photoshop for everything from simple image adjustments to complex designs. But Photoshop is also nearly $400 and can be overwhelming to a first time user since it's designed for professional use. Piknik could be the alternative you've been looking for.