The Gmail team points to our own HTML work-around as the only means Gmail users had to get an image embedded amidst their message text. Now, once you enable the "Inserting Images" feature in your "Labs" list and make sure you have "rich formatting mode" chosen in your composition settings, you'll see a new image button on the toolbar, and you'll have the option to upload a file from your system or grab one off the web to plant right where your cursor was when you hit the button.
As noted, Gmail (and many other webmail services) still restricts images from displaying until someone clicks the "Show images from ..." or "Always display images" links on one of your messages, so you might note that in any must-see pics you're sending off. Thanks, AcaLazarevic! New in Labs: Inserting images [Official Gmail Blog]