Today I came across a very good freeware alternative for SnagIT called as shup. Shup has many extra functionalities too.
Shup is a small program that lives in your system tray, waiting for you to activate it via customizable hotkeys. Once activated, it captures your desktop or the currently active window and opens the builtin image editor, which allows you to paint, crop, etc; you can also rename the file and add upload tags. After you are done editing the image, it is uploaded to any of the supported file hosts (Stashbox.org, Flickr, PhotoBucket, WaffleImages, ImageShack) and the new URL is placed into your clipboard for easy access.