Another vote for GIMP. How it compares to Photoshop? It all depends on what you are doing with it...
But it is roughly equivalent. GIMP is better at working animations, Photoshop is better at handling finer resolutions etc...
Gimp can do pretty much everything photoshop can, the only thing it doesn't really excel at is color. The color handling on Photoshop is apparently much better, and photoshop can handle 24 bit color depth or something like that.
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