Flickr is great, but you have bandwidth limitations for one, and size limitations unless you get a Pro account. (We are talking about free services, right?) So for that reason, I think Imageshack is a better source for this sort of thing.
I use Flickr because it makes the resizing for thumbnails easy, and still allows someone to click through to get to the original image. Also, like slackferno
I use Picasa (Google's free image editing software) to crop, resize etc many of my pictures. I *am* a pro user, but that is because one of my other hobbies (LARP) means that I often upload a couple of hundred pictures in amonth, so I did go through the bandwidth limit. I wasn't aware of a size limitation on the free service.
My main reason for recommending flickr is that I've never had any problems with their service. Images that I've seen on Craftster hosted with photobucket, imageshack, etc quite regularly come up with red X's due to the high bandwidth of people looking at the photos. Flickr doesn't restrict the number of image views.
It's also basically ad free. It has a policy where in times of high bandwidth demand it may put ads on
pages (looked it up - "we reserve the right to serve ads on your photo pages when viewed by non-members of Flickr in extreme cases"), ), but I've never heard of an ad on the site, in nearly a year of using it.
It has a fantastic, simple uploading tool, allowing you to drag & drop images to be uploaded, rotate them, and resize the uploaded versions.
It has good methods of organising photos, allowing you to put photos into sets, and apply tags to individual images. So while I may have my finished objects in more than one set, I can find all the skirts by ckicking on a'skirt' tag. My only criticism of the sets organiser tool is that it is quite graphics/flash heavy, but there is a way to add images to a set wthout ever going into the Organizr tool.
Flickr also allows you to grab a thumbnail, square, small, medium, large & original of an image, in either HTML or the direct link for BBcode. Just click all sizes above an image.
Lastly, I adore flickr because it has a sense of humour. No boring dialogue boxes. Because I signed up for the service a long time ago, I "must be Old School. Rock On." *grins*
As an aside, I'm a pro user because I like supporting online stuff I use regularly. (Those people noticing a lack of Friend... status <-- can take heart that it'll be remedied when the stupid bank finally fix my not having a credit card situation)