Adobe Photoshop would be ideal, but since its not free (nor even cheap) I'd recommend The Gimp (or if you're used to Photoshop but don't wanna spend any money, get this variation on The Gimp called Gimpshop).

There's also a handful of online photo editing programs that are free and may do the trick

Now if you're wanting to take a .jpg and make a transparent PNG file ... well you got your work cut out for you.