There are a lot of image editing programs available today, some free (MS Paint) and some exorbitantly expensive (Photoshop) . One of them stands out as being feature rich (management of layers, support for diferent file formats) and free. Paint.NET (version 2.6 as of this writing) is an excellent MS Paint replacement and it can handle most image editing tasks very effectively.
Paint.NET started as a university project to replace MS Paint and became a full fledge image editing program. With each version more features have been added, without it become a huge program (installation file is around 4 MB and when running it uses about 23 MB), compared to other imaging heavyweights. In short, Paint.NET delivers as an excellent MS Paint replacement. It can handle layers and different image effects (usually the realm of Photoshop) and it can handle different file types with ease (JPG, PNG, TIFF, BMP, GIF, TGA and PDN). For a full description of features and changes to each version, just go to the Paint.NET homepage.
I use it and did I mention that it was free? 🙂