To enable this feature go to the Gmail Labs tab, look for “inserting images” and select enable followed by clicking “save changes.”
Once you’ve done that just click on the images icon on the Gmail toolbar while composing a message. You can insert images in two ways: by uploading image files from your computer or providing image URLs.
A couple of caveats from Google:
- Make sure you’re in rich formatting mode, or it won’t show up.
- Keep in mind that Gmail doesn’t show URL-based images in messages by default to protect you from spammers, so if you’re sending mail to other Gmail users, they’ll still have to click “Display images below” or “Always display images from …” to see images you embed.
