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(you'll have to forgive me I started using photoshop in highschool and I used it throughout art school so I'm a little biased)
For the more sophisticated stuff: Corel 8 and Photoshop.
A neat tool for creating favicons is MicroAngelo [impactsoft.com].
For extracting icons: Icon Extractor [gregorybraun.com].
For animated graphics we use ULead's GifAnimator [webutilities.com].
Screenshots: Hardcopy [sw4you.com]
Registered Photo Impact the other day but haven't yet found the time to study the manual - I find it not that "intuitive" by itself, though I've been into graphics (DTP/WWW) for 12+ years.
Of course, my favourite graphics creation utility is called Seth. ;) Its effortless for me to use :)
I've worked on some fine art sites, and I don't think any software except Photoshop could possibly have produced the needed results. Even so, I needed the HVS JPEG plug-in to get a small enough file size without sacrificng appearance.
PS is also required when the client supplies funky source materials. Photos with color casts and exposure/lighting problems just scream for Adobe's help. Having a good looking product shot can be criticial for online sales.
For animation, even though I think Ulead rules, nothing beats Photoshop's layers for pre-building the frames. Bronco-busting the GIF color palette is another shining
star in Photoshop's crown.