What software do people use to make graphic 'tags' for sites like myspace?

Answer 1

Usually Photoshop. It's pretty ubiquitous.

If you're willing to face a tough learning curve you could also try the GIMP:

http://www.gimp.org

Depending on what OS you use, there's loads of other graphics programs that should work just as well. You'd need to include more details, though.