What version of Photoshop will work with Mac OS X 10.5.8

Best to ask Adobe for confirmation.

You can certainly upgrade your Mac:

Start by checking if you can run Snow Leopard:

Requirements for OS X 10.6 'Snow Leopard'

http://support.apple.com/kb/SP575

The OS 10.6 Snow Leopard install DVD is available for $19.99 from the Apple Store:

http://store.apple.com/us/product/MC573/mac-os-x-106-snow-leopard

and in the UK:

http://store.apple.com/uk/product/MC573/mac-os-x-106-snow-leopard

but nobody knows for how long it will be available.

When you have installed it, run Software Update to download and install the latest updates for Snow Leopard to bring it up to 10.6.8, or download the combo update from here:

http://support.apple.com/kb/DL1399

Check via Software Update whether further updates are required.

You should now see the App Store icon in iTunes, and you now need to set up your account:

http://support.apple.com/kb/HT4479

To use iCloud you have to upgrade at least to Lion, but some functions are only available in Mountain Lion:

http://support.apple.com/kb/HT4759

You can also purchase the code to use to download Lion (Lion requires an Intel-based Mac with a Core 2 Duo, i3, i5, i7 or Xeon processor and 2GB of RAM, running the latest version of Snow Leopard), or you can purchase Mountain Lion from the App Store - if you can run that:

http://www.apple.com/osx/specs/

you might want to bump up the memory for any photoshop version you want to run. memory is cheap.

PSD CS6 required 10.6 and up.

I run photoshop cs3 through cs5 on 10.5.8. (actually I run cs6 as well on virtual partititon). they work fine.

cs5 requires at least 1 GB RAM, and it uses at least 70% when running, if you have other things running, you will be unable to install and you will have lag issues.

CS4 required only half a GB, so if you don't upgrade your ram, it might be the most useful version for you.

CS3 was ok too, if you're on a budget.