ImageMagick & GD2

ImageMagick - is a robust collection of tools and libraries to read, write, and manipulate an image in many image formats including TIFF, JPEG, PNG, PDF, PhotoCD, and GIF.
With ImageMagick you can create images dynamically, making it suitable for Web applications.

GD2 - Creates PNG, JPEG and GIF images, thumbnails, and most anything else on the fly. Many popular photo gallery's require GD2 support, and you will have it with your web hosting hosting package.