Inserting images in Gmail:
Well, it's about time. You no longer have to use workarounds to put images into your messages or attach images when you really want to inline them. Just turn on "Inserting images" from the Labs tab under Settings, and you'll see a new toolbar icon like this:Make sure you're in rich formatting mode, or it won't show up. Click the little image icon, and you can insert images in two ways: by uploading image files from your computer or providing image URLs.
Source courtesy
http://gmailblog.blogspot.com/2009/04/new-in-labs-inserting-images.html
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