Picnik on its official blog:
Since joining Google in 2010, we have been creating editing magic in Google products while continuing to keep Picnik awesome. But now we get to focus on even awesomer things. Picnik will be closing on April 19, 2012.
Picnik was acquired by Google in March 2010. Just 20 months later, Picnik as a service is being shut down. As a gratitude to its users, Picnik has announced free premium accounts for everyone.
Google is still spending fanatically.