Commercial e-mail messages often contain images, graphics and other design elements. When a message is sent in the HTML format, images used in the message body can be either linked or embedded.
Linked images are not part of the message itself. They are usually hosted by the message sender and referenced in the message body via an <IMG> tag pointing to the sender's server, as follows: <IMG SRC="http://www.sender-company.com/images/flower.jpg">
The main advantage of linked images is that the message body remains small. The main disadvantages are that such messages cannot be viewed off-line, and they have a limited lifespan (images on the sender's server may be moved, deleted, or the server itself may go offline).
Unlike linked images, embedded images are part of the message itself. They are similar to regular attachments, although they use the multipart/related format, as opposed to multipart/mixed. An embedded image is also referenced in a message body using an <IMG> tag, but instead of a URL, an image identifier, or Content ID, is used, as follows:
A message with embedded images can be viewed off-line and remains intact over time, as images are permanently attached to the body. A message may contain regular attachments and embedded images at the same time.
Php Send Mail offers support for embedded images and required two arguments: the path to an image file, and its Name, which is simply an arbitrary string without spaces. Tha image must be located in your site. The path cannot be a physical path but must be site relative