MS paint, gimpshop, photoshop. Any photo editor you feel comfortable using. Most people prefer programs that can hold alpha channels like png so the background remains transparent. but you can also make sprite sheets work too. just work by factors of 2. ie 2,4,8,16,32,64,128 so on and draw within those parameters. you want to make sure your spacing is spot on when placing multiple items on the tile sheet else you will run into issues assigning collisions, if any, to the selected tile. Try to select items in a category too and not try to jam everything into one big tile set, easier to work with smaller ones than a huge file that can be buggy. hope this helps.
