Em and I have been using Google's free picture sorting system Picasa for about 3-4 years now. If you have never checked it out you should - especially for all of our fellow parents out there. Not only does Picasa sort all of your pictures and make them really navigable - now with Picasa 3 you have more features than ever. I've only been playing with this program for about an hour and have already been blown away. I want to list a couple of them out below:

1. The ability to create a collage like the one above. There are SO many ways to change these up as well...different styles of collage, backgrounds, shifting the photos, etc.
2. This ability to retouch images and remove blemishes! 
3. Creating "movies" with your images and adding music to them.
4. Uploading your videos directly to youtube.
5. Searching and labeling your pictures.
6. Directly sync your pictures to a private web album that you can share with friends and family.
7. Order prints from a variety of outlets like Snapfish or Walgreens directly through Picasa.