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Start by clicking the "Edit Photo" button in the toolbar above your photo.
Click on the "Edit Photo" button to get started.
If this is the first time you've clicked on the "Edit Photos" button, you will be asked to pass through the step of authorizing Picnik to load up your photos. (You'll only have to do this once.)
Enable Picnik to open inside your Flickr account.
After you've authorized Picnik, edit your photo to your heart's content! Then just click "Save" and you're all done.
Experiment with the Picnik editing features.