When the image is used in CanvasMode
(which is enabled by default) all changes made to the image are saved on the client. In order to save the edited image to a custom location, you have to make sure you are calling the save through the client-side saveImageOnServer()
You can find detailed information on how to save the edited image to a custom location on the following live demo: Save Image to a Custom Location
I hope this helps.
If you want to get updates on new releases, tips and tricks and sneak peeks at our product labs directly from the developers working on the RadControls for ASP.NET AJAX, subscribe to the blog feed