Palette
palette.fm
Colourises a black-and-white photo and lets you steer the colours
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picnik.com
In-browser photo editing that was genuinely good, wired straight into Flickr.
Use Photopea instead
Opens a PSD, keeps the layers, and runs entirely in a browser tab. Ad-supported, and heavy files or long filter stacks make the tab crawl because it is all one browser process.
Open PhotopeaPicnik made real photo editing feel casual: open an image from Flickr or your desktop, crop, retouch and apply effects, save it back, no download. Google acquired it in 2010, folded the good parts into Picasa and Google+, and closed it in April 2012. Photopea is the closest thing to it that exists now, and is considerably more capable.
Questions
No. Picnik is no longer running and picnik.com does not serve the tool any more. Photopea is the closest current equivalent — it opens a PSD, keeps the layers, and runs entirely in a browser tab.
Yes. Picnik sends your input to its own servers to process it. That is fine for public material; for anything containing personal data, use one of the on-device tools instead.
Closed by Google in April 2012; the domain no longer serves the editor.
Alternatives
Same category or same task, ordered by how closely they overlap.
palette.fm
Colourises a black-and-white photo and lets you steer the colours
pixlr.com
The 2008 browser photo editor, now split into a simple and an advanced one
cleanup.pictures
Paint over an object in a photo and it fills in what was behind it
photopea.com
Opens a PSD, keeps the layers, and runs entirely in a browser tab
remove.bg
Cuts the background out of a photo in one click
upscale.media
Enlarges a small image 2x, 4x or 8x without it turning to mush