Here is an example of an inline image. It includes the alt attribute that gives a very detailed description of what the picture is. In a minute I will allow you to blow it up to have a better look.
Now, you can click on this picture to see it up close. Pretty cool huh?
GIFs are great for logos or images that are composed of mainly one color, but they are not the best for photographs. JPEGs, however, are the best option for photographs because they support more colors. A PNG in many ways is like both of the other files, but IE doesn't support it so it is rarely used.
One of the reasons why a GIF is the best for a logo is because of its transparency. JPEG has no transparency at all so it would usually just show an image as a box, whereas the GIF would show only what you would want it to. If only IE could support a PNG, because it can handle even more transparency levels than the GIF. As you can see I have been using JPEG for my images since they are photographs.
Here's a beginning photo gallery if you want to click on it.
Here's an example with a black border around the picture.
This picture was taken in Thailand.
Images should be small (72 to 92 pixels) and should not exceed 20 kb without the user actually clicking on a link to see a larger file. Crop, adjust, and edit all of your pictures to show exactly what you want the user to view. Also, source your images when needed.
Just like a background color, images can also be used in the background and provide contrast with the rest of the web site. When choosing a background photo however, you need to be careful that the text is still plain and easy to read. From personal experience, background photos aren't my forte but they can be useful at times.
Images are crucial in a web site. It is one thing that I need to work with on mine. Viewers love to see images, they are not going to sit and read text all day long. We need to remember this as we our developing our web pages.