The GIMP 2.2 is now out. Download for Windows: http://gimp-win.sf.net/. The GIMP is a tool for working with and manipulating images and is open source. Not the most intuitive tool but very powerful, and is extended via plugins. Since the GIF patent expired you can generate GIF images (not available in version 2.0 and earlier). The file open/save dialog is a lot better in this version than the last version (2.0) and contains an image preview. Works on many platforms.
A good free tool for working with graphics. If you already have Photoshop or another professional package, then this may not offer any more over it. Help is a community project - not the same quality as what you may get with a commercial product, but covers the basics.
Total download size (with all optional components - help and animation): 20775kb (20.3MB) - GTK+ 2.4 runtime (3292kb), GIMP (7165kb), GIMP Help (9569kb), GIMP Animation Package (749kb)
Paint.NET 2.0 (developed by Washington State University with Microsoft mentorship) is also out. A Paintbrush replacement tool, requires .NET Framework and Windows XP. 7.71mb download (28.7mb with Framework).
Use Paint.NET for basic manipulation of bitmap images and GIMP for more complex work.