Everyone's gonna say "Photoshop," but I'm gonna say Illustrator or CorelDraw. A vector graphics/layout package is way better than just a photo editor for dealing with this sort of thing. Although, since the final result is usually low-res (300dpi) and compressed with the wrong tool (JPG; covers would be better as PNG), I guess Photoshop will do. Paintshop Pro's just about as good.