Now, here the confusing bit! You need to open it up in PSP (Paint Shop Pro). Using the Magic Wand Tool - 
and
select the white background like so:
Now go to Selections - Invert, or press Ctrl+Shift+I. Now the picture should be selected, right? Now open up a new page, slightly bigger then your picture, so for me the picture is 200x200, so my new page is going to be 250x250. Now you need to copy (Ctrl+C) your picture, and paste it into the new page (Ctrl+L). We do this because, on the orignal picture, we won't have enough room to add the outline to it!
The next task is to re-select the background and invert it again. Incase you forgot how to invert it, its Ctrl+Shift+I.This is the part where we actually make the outline! Go to Selections - Modify - Expand and expand it by 2-3 pixels.
Now, invert again and select the colour you wish to colour in the outline with. I'm going to use the pink color on his feet. Now fill in the background with this colour (still with the rest of the picture selected - DO NOT DESELECT!).
Next, invert and expand again by the same amount of pixels you chose earlier! Again you need to invert.
We're almost done now... the last major step is to delete the background. To this simply press delte on your keyboard, or click "cut" from the Edit menu!
Done! Your image is now complete! That is unless you want to crop it, add any text, or credits! This is my final piece:
