Few years back I saw this online Mini-Photoshop (http://pixlr.com/editor/) which works decently in browser and has sufficient functionality available for beginners.
This is how Pixlr looks like... Pixlr has most of the things like Layers, Adjustment Layers, Color Adjustment controls, tools, Brushes, Eraser, Clone, Selections, History etc...
Most of the basic things which come to our mind are available in this tool. I tried it with one of the JPEG and performance was not bad.
It was working fine, although I was not able to get good results for some of the tools.. But it's interesting to see such an online application which provides free capabilities to edit our photographs.
Final results from http://pixlr.com/editor/ can be saved as JPEG, PNG, TIFF and PXD... PXD is Pixlr file format to save editing details in layered format.
Know more about Pixlr in detail at http://blog.pixlr.com/