Picnik.com
The online photo editor interface that is available on this site is nothing short of remarkable. You do not need to know anything about editing or photo composition in order to use this site, it is that user friendly. One of its most noteworthy features is its ability to integrate with other Web 2.0 services.
Splashup.com
This site used to be known as Fauxto.com. It is an online photo editor that resembles a desktop application, and anyone that is familiar with Photoshop will feel right at home here. It allows you to open files directly from your computer, or you can pull from popular photo sharing sites like Flickr. It can also import directly from webcams.
Snipshot.com
Unlike most online photo editors, Snipshot is not a flash based editor. Instead, it is a highly responsive Ajax powered image editor. You can still import photos from your computer, or from web addresses, and will allow you to save your work in any number of formats, including PDF and Photoshop PSD.
Picture2life.com
What makes this site stand apart from the others of its kind is the radical image editing toolbox. While others generally have a single toolbox available, and a host of buttons to play with, this site has a descriptive side panel interface that is layered into four vertical tabs, making it a lot easier to use. Each tab replaces the current sidebar with one for each function, with easy to follow directions for the user to follow.
LunaPic.com
This site stands out for its easy to use converter from photo to animated GIF files, along with a host of animation effects that are instantly ready for use on any social networking site of your choice. Combined into a slideshow, you have your own personal cartoon show going in seconds.