Over the past several years, I have maintained a list of freeware image editing tools which I have posted on several forums. Although the programs in the list each had their particular pluses and minuses, none were really a complete image editor along the lines of Photoshop or Paint Shop Pro...until now.
MAGIX has released their Photo Clinic software as full freeware. With this program, you get the functionality of working with layers, cloning tools, and paint tools. Plus it also accepts Photoshop compatible plugins. A big bonus for web designers is that you can also edit PSD files with this program; making it ideal for someone on a limited budget, or who just cannot afford one of the more pricey editors, to be able to edit a PSD template they got for free.
The download is about 10Mb
As the forum will not allow me to post a link, I can just tell you that the program can be found at Download.com and Tucows, or just do a Google search for 'magix photo clinic 4.5' and those will be the top results.
For those wanting to expand even further upon the capabilities, or ease of use, of this free editor, here are some links to free Photoshop Plugins you can use with the editor (sorry that I can't make them live yet):
For those who do not have Gimp, I do not recommend it, and I'll tell you exactly why; because in order to run Gimp on your Windows machine, you have to install the GTK+ library which requires you to rename two of Windows' dlls. If you don't mind playing the rename game when you want to run a program which requires those dlls, more power to you.
A better option for Windows users who want to run Gimp on their machines in to get Gimp Portable, which is completely self contained (does not require the renaming of any dlls), and will run off of a flash drive or from your hard drive (you will need to manually place a shortcut on your desktop if you are running it from your hard drive).