Aviary offers a comprehensive suite of free image editing tools. I’ve never found the tools they offer to be terribly intuitive, but they are powerful once you figure out how to use them. For that reason Aviary itself isn’t something that I’d recommend for use with students unless you plan to use it frequently. That said, their new Firefox add-on could be a good tool for touching-up images that are stored online or for creating screen captures with text and drawings.

Aviary’s new Firefox add-on is easy to use once you’ve installed it. To use it, simply right-click on anything, select “take a screenshot,” save it and begin editing. You can add text to your screenshot, draw on it, or highlight sections of your screenshot. To see screenshots of Aviary’s Firefox add-on in action, visit Read Write Web’s article on Aviary which is where I learned of this new tool.

Applications for Education
Screenshots can be very useful for teachers who need to give directions on how to navigate a website or use a piece of software. Being able to highlight, circle, and type on a screenshot can add clarity to those directions.

Here is a related resource that may be of interest to you:
Four Free Tools for Creating Screencasts