There are dozens of graphic programs that don't cost a penny and provide high quality graphics. Features range from simple editing tools (rotation, special effects, text insertion) to 3D design and animation. As far as image manipulation is concerned, the sky is the limit.
I've listed some of the most popular (and easiest to use) programs below.
Related post: 12 Sites Where You Can Get Fabulous Free Photos
When designing a book cover, keep in mind the following:
1) Your book cover will appear as a thumbnail, so make sure the title is clearly visible.
2) Don't get carried away with too much detail. Busy cover images get lost in a thumbnail.
3) Advertising studies have revealed that people are most attracted to faces.
4) Avoid white - at least around the edges. You book cover will appear against a white background.
Picmonkey - A free photo editor and collage maker that works in your browser. You can get a good idea of what Picmonkey can offer on Pinterest. Features: text, overlays, photo touch up, collage (simply upload images), and editing tools. Picmonkey is easy to use, so if you are a novice, start here.
Paint.net – A free image and photo editing software for Windows based PC's. This program was voted #19 out of the top 100 programs of 2007 by PC World. It has full support for layers and special effects, the tools are top notch and highly recommended by many users. There is a strong online community for support and frequent updates to the software. Comparable to Adobe Photoshop.
Ultimate Paint - Offers a freeware program with more than a hundred advanced image effects and correction filters. Works with Windows.
Gimp - A free editing and retouching software program that can be used with Mac, Linux and Windows (anything after XP). Gimp has many of the features of Photoshop: layers, clone tools (to copy pixels), blur and sharpen tools, color gradients, image enhancement, and so on.
Inkscape - A professional vector graphics editor for Windows, Mac OS X and Linux. It's free and open source. Features include: layers, drawing, text tools, shape tools, moving, and many more. The website has an image gallery and tutorials.
DAZ Studio - A program for making 3D images and animation. Particularly useful for sci-fi and graphic novel illustrations.
iPiccy - This free online program allows you to do just about everything Photoshop does, but without the hassle of trying to figure out how to do it. Very user-friendly. There's no registration; just upload your photo and start editing. (Many thanks to Kristin for the tip!)