People use a variety of programs to do that. Popular ones are Photoshop (expensive if you don't already have it), GIMP (free and does almost everything that Photoshop does), Dogwaffle (there is a free version of it) and some people use Paint (not the MS Paint that comes bundled with everything else on your computer).
If you have the ability to do your own portraits, it's nice to have something that is original and will make your game look distinctive.
Ah okay, I didn't realize you could do that, I guess there's a folder in the program that lets me put in my own graphics? I'll have to look around that tutorial page to figure it out.