The Picnik/Flickr collaboration works similarly to other 3rd party services who’ve built additional tools on top of the Flickr API: You’ll need to pass through the step of giving the Picnik service permission to edit and save your photos… It’s a little bit like you’re “installing” Picnik on your Flickr account, but with nothing to download.Flickr members will now be able to click on a "edit this" link which will take them to a Picnik powered page that allows you to rotate, crop and resize pictures. The application also allows you to adjust sharpness, colors, exposure, remove red-eyes and if you're feeling lucky there's also an auto-fix button.
It won't replace Photoshop or basic photo editing programs like Paint.NET but it's a nice tool to do some quick online editing of your Flickr pics.