Just as "google
" has transmogrified
into "perform a Web search (on)", "photoshop" has come to mean "edit
an electronic image
using a graphics program
Person A: "This blemish/defect/undesirable element ruins the picture!"
Person B: "Don't worry, we'll just photoshop it out."
Graphic designers have long used Adobe Photoshop (or Paint Shop Pro, or GiMP, or any other similar software package) to edit images for all sorts of purposes, but there has been a relatively recent upsurge of image editing - most of which is Web-based and much of which is with humorous intent - and with it, a corporate brand name has turned into a verb. (The noun form also refers to the resultant photoshopped image: "a photoshop of the President smoking a joint".)
The heads of celebrities are photoshopped onto naked bodies and posted all over the Internet. Instructions on entries at fark.com have included "Photoshop unlikely weapons of mass destruction" and "Photoshop a porno version of your favorite movie"; such challenges have resulted in hundreds of photoshopped responses. Over at somethingawful.com, where they hold weekly "Photoshop Phriday" free-for-alls, introductory text on pages featuring the sumbissions includes "photoshopping the living hell out of all kinds of crappy books designed to inflict society's many antiquated flaws upon our young". An article on that site offers advice on how to improve one's photoshopping skills: "Remember that when Photoshopping up images to revert to the lowest common denominator, image quality-wise." At b3ta.com, where they revel in media manipulation and other Internet phenomena (they "...LOVE THE WEB" after all), "Challenges" have included "Photoshop for World Peace", "Photoshop Jesus", and "Photoshop This Kitten".
This trend has, naturally, gotten intellectual property lawyers in a huff, and free speech activists have stood their ground ("It's parody!" "It's satire!" "Fair use!"). Corporations certainly disprove of any unauthorized use of their copyrighted material, and news outlets such as AP contend that the proliferation of photoshops of news photos undermines their reputation.
(Note: there seems to be variance in the capitalization of the word; some parody sites feature both versions.)