As Micky mentions, Photofiltre is an extremely capable free application - found at
www.photofiltre.com - I use it for much of my basic image fiddling. There's also a paid for version called Photofiltre Studio, with some extra functionality - most notably layers.
The Gimp is great too, as he says, but the interface is an acquired taste I've never really got my head round - and I'm about three years in with The Gimp.
A less well known but capable editor is Satori PhotoXL (
http://www.satoripaint.com): it has a few unique features, and is cheap as chips at £6.95.
The nearest thing you'll find to Photoshop though, is Ability Photopaint.
It really is a Photoshop clone (they describe it as "
a photo and image editor that will instantly feel familiar, both in its interface and functionality, to users of Adobe Photoshop"), and is an absolute steal at £20.
http://www.ability.com/sales/products/paint.php
As KC suggests, it's hard not to love Paint Shop Pro, and although it's more expensive than anything I've mentioned so far, it's still a bargain compared to Photoshop and is
very good.
I've got PSP 9 and I can't fault it for power vs. usability - though in truth I rarely need it or Photopaint: I'm not a "power user" by the remotest stretch of the imagination, and as long as the basic picture I've taken is "thereabouts", Photofiltre has a lot to offer.
Don't forget about Photoshop Elements though - v4 is available for about £50.
Keep an eye out for free copies of earlier versions of Paint Shop Pro and the rest on CDs with computer magazines, and bear in mind that the latest Paint Shop Pro and Photoshop Elements won't run on Win 9x/ME.