An image says more than thousand words and a PhD thesis can sometimes become quite long. It is therefore nice to replace some words with an image from time to time.
To include images in a LaTeX document is it very nice to have resizable figures which look good. To be able to resize an image it is recommendable to use vector graphics. Vector graphics consist of geometrical objects which can easily be resized while maitaining crisp images. Bitmap images on the other hand will often become unclear when resized. To make vector graphics figures I use Inkscape. It is simple and really easy to use.
To create graphs and plots I would use OpenOffice (Calc) and export the figures as pdf with lossless compression of images. The resulting pdf file can be imported directly when using LaTeX. I don’t really make that many graphs so I have not exported that many figures like this and there may be other, easier was to do it. However, this works quite nicely for me. It is of course possible to edit the pdf file in for instance Inkscape or some other image editor like gimp. Gimp is an open source equivalent of Photoshop. Some say it is better while others prefer Photoshop. I have not used either of them that much to have a clear meaning. Nevertheless, gimp should cover most of your needs.
When making plots and graphs gnuplot is a much used option. I must admit that I have not personally used it a lot but I know that other researchers swear to it. Like Inkscape, gnuplot is able to save scalable vector graphics. This is as mentioned a big advantage when resizing images. Everyone who has tried to export a graph or a plot as an image from Excel and resized this shold know what I am talking about.
Agreed over having images replacing text. It can get too long and boring otherwise!
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