Pixlr is a powerful free online Image editor. Peoples looking for a photoshop like experience on web will be just a home with most of the features imported from photoshop. There is the history viewer, layer mask, gradient tools, blurr/sharpen, filters and other tools from photoshop. The more advanced parts of photoshop aren't there but for a web image editor it is still a powerful and dynamic one out there.
You will need to have the latest version of adobe flash installed and java might be needed in some cases too(like in print screen paste).
You can also sign up for username and store your images on the web and edit them later. The images you edit can be saved in your computer, and also shared with social networks like facebook, picasa, Flickr.
You have option to edit photos from your computer, url or from your accout in pixlr.