Photoshop is the choice of professionals. It's not cheap and it can take a while to get the best from it. (I recommend buying some books about it, or simply borrowing them from the library). However, It's my favourite program on my PC and I'd hate to be without it.
Among the free programs on offer, GIMP is the closest to Photoshop:
http://www.gimp.org/
Again, it takes a bit of getting used to but it's incredibly flexible.
At a more basic level, Google's Picasa is popular for image manipulation:
http://picasa.google.com/
Sticking with the Freebies, Serif Photoplus 6 is worth a look:
http://www.freeserifsoftware.com/software/Phot oPlus/default.asp
If you're prepared to spend money on software, I'd recommend 'pushing the boat out' and getting Photoshop. Otherwise just try the freebies I've mentioned. (They're at least as good, and possibly better, than most of the commercial stuff that's on offer).
Chris