gimp indeed or photoshop itself
myself i use sony vegas since the options are endless and good looking so i make a thumbnail in there and make a screanshot lol
Let's set something straight first. Photoshop is a single image manipulation software made by Adobe. Photoshop is not the process of image editing. Image manipulation refers to image editing. I would reccomend gimp even though I don't use it much myself.
If you want a free online one pic monkey is good but it's basic! If you want something bit more deeper than gimp. i started making my last couple of thumbnails with picmonaey though!