How to edit Email Templates in Magento

To create a new Email Template you have to go to
admin –> system –> transactional emails –> add new template –>
choose the base template from the drop down and edit as you want.

Then you can assign the newly created template to proper functionality. For e.g. if you want to assign new tempalte for New Order confirmation email then you can assign as follows.
Go to admin –> system –> configuration –> Sales (in left section) –> Sales Emails –> Order

Then select new template in “New Order Confirmation Template” and “New Order Confirmation Template for Guest” dropdwons.

Finally you have to clear cache then it will work.