You can use either Paint.NET or GIMP to edit an image for avatar and signature creation (yes, they are both FREE to use). Though, it's best to find an image with high quality for best results. If you want transparency (like mine), make sure you clear out any unwanted parts of the image without harming the character. Then after that, save the image in
.png format. Here's an example of Paint.NET.....
Make sure as Jarby said to properly resize and crop the image to get the best out of the avatar's quality (Maximum dimensions; width: 128 pixels, height: 128 pixels, file size: 88kB. Formats .jpg and .png supported)