Much like iPhoto on the desktop, the iOS app silos your photos by source as well as picking up existing albums. It automatically creates a new album of photos you edit and doesn't overwrite the originals. The major tool I think it's missing is a way to manage and delete photos (as far as I can tell, you can only hide photos, but not delete them). You can only add Events-based photos by syncing via iTunes or importing via the Camera Connection Kit.
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If it weren't for the help bubbles that pop up when you tap the question mark icon, much of iPhoto's capabilities would be hard to find and use. On special effects it's especially difficult to tell the variations apart (at least on a non-Retina Display).
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iPhoto can shows you the strokes for the localized adjustments, which is nice, but overall I'm not really thrilled with the results. For instance, desaturate doesn't accumulate, it just does it at a single intensity, for the first stroke. The Repair brush looks like it simply blurs. And for operations like soften and sharpen, it's hard to see any effect at all; that may be different on the higher-resolution iPad.
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Drag to adjust
For global exposure adjustments, you can either drag within the image or drag the slides for highlights, shadows, contrast and brightness. This works intuitively and well for small adjustments, but without any feedback (like a histogram), it's easy to produce a lot of contoured results. Once again, these may just be out-of-gamut on the older display.
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Make it pop
iPhoto gives you a variety of ways to increase overall white balance, including a one-touch manual adjustment, plus you can saturate greens, blues, and skin tones. You can also block skin tones from color shifts.
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Crop and rotate
You get fairly conventional options for crop and rotation, though I like the gyro interface for rotation.
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Though it has a large number of special effects, it's hard to distinguish between a lot of them, even when applied in real time to the large image. On effects, as well as a few other operations, you can't zoom in to see the localized effect.
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Unlike Photoshop Touch, which locks you into a landscape mode, iPhoto can operate in portrait. That's probably because it also needs to accommodate iPhones.
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View similar photos
Double-tapping on a photo brings up similar photos, which seems to mean nearby chronologically with similar composition. You can zoom individually on each to compare and cycle through them for flagging, favorting, hiding, or automatic retouching. (For some reason our tool is cropping the bottom of the screen, but you can see the flagging interface at the bottom of the previous slide.) It automatically creates new albums for flagged and favorited photos.
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On one hand, the automatic journal-creation tool is neat and fun to have. However it's not nearly as polished as I expected. The only information it can automatically insert is a date widget, which picks up the date from your photos. But you have to tell the weather widget what the weather was--I was hoping it could use a lookup--and the rest of the annotations use odd, mismatched fonts that you can't change or resize, and it all looks a little cheesy.