This is a jQuery Plug-in built on top of the Pixastic JS Library. Check the source for how to implement.
Click one of the effects to the right of the image. Emboss (Embs) and HSL are pretty cool.
You can also select only a portion of the image and apply effects to that. Simply drag and drop your cursor over the image. Note that some previews don't work properly (might try and fix that) but the end result looks as it should.
To "save" your image simply click it to open it in a new tab. Because I also use dragToSelect it can be tricky to get the click-event triggered. This is obviously bad code on my part and may get fixed.
Check the source for all necessary (and optional) scripts and stylesheets.