Whatever your default image capture application is will always open when you connect the iPhone. This appears to be Photoshop on your computer (It is Picasa on mine). This is also normal. iTunes should then open (it usually takes longer). Even if you open iTunes it will take a while to recognize the iPhone.
Also note that the iPhone must connect directly to a USB port on your computer, not to a hub. Sometimes it will work with a powered hub (one with its own, separate power brick) but it is safest, at least for the first sync, to connect directly to the computer. The issue here is the amount of power the iPhone requires to sync reliably.
If you have connected the iPhone directly to the computer AND waited for a couple of minutes and the iPhone still isn't recognized you should uninstall iTunes completely and reinstall it from a fresh download. The instructions to uninstall on a PC are:
1) Open the 'Add/Remove Programs' window from the Control Panel (or, in Vista, 'Programs' then 'Uninstall a program').
2) Remove/Uninstall iTunes but do not immediately restart your computer.
3) Remove/Uninstall Apple Mobile Device Support.
4) Remove/Uninstall QuickTime.
5) Manually delete the OutlookSyncClient.dll file located in C:\Program Files\Common Files\Apple\Mobile Device Support\bin (if present)
5) Restart your computer.
6) Download the latest iTunes from
http://www.apple.com/itunes/download/ and install it.