All versions of Windows come with a sad and very old image editing program (if you can even call it that), Paint but a replacement is in the wind, it’s doubtful it will ever be included with Windows but thankfully for you and me Paint.NET can be downloaded for free.
Paint.NET has been around for a couple years but has seen several version updates and is maintained by some of the developers that were part of the original Paint program.
It is now in version 3.10 and is almost like “PhotoShop Lite” as it has support for layers, tabbed file browsing, unlimited undo, special effects and lots of tools to choose from (just like in PhotoShop but not quite as many as PhotoShop would offer).
If you can’t afford or don’t want to pay for PhotoShop then Paint.NET is one of the best to choose. There is still the GIMP (but face it GIMP people, the UI is downright ugly) and several other paid alternatives to pick from but in my opinion, Paint.NET wins on count of being free and easy to use but still offering powerful tools to keep most users happy and is compatible with Windows 2000, 2003, XP and Vista (does not support 9x versions of Windows).
Runner up would have to go to PhotoPlus which was originally going to be in this post but full compatibility with Vista is not guaranteed with free version 6 and right now an upgrade to version 8 enhanced will only cost $10. As far as Serif products are concerned, you will need to spring for PhotoPlus X2 at $80 for use on Vista.
If you are running XP then PhotoPlus free edition version 6 would be my choice (you will have to register for a free serial key).