It's an external resource! It's likely going to be one of 3 file formats, the Joint Photographic Exchange Graphic (JPEG) format, the Compuserve Graphics Interchange Format (GIF) or the Portable Network Graphic Format (PNG.)
JPEGs are compressed with a lossy algorithm (meaning the compressed data cannot be recovered.) This keeps them small, while still maintaining excellent quality. JPEGs are most often used for photos.
GIFs are a 256 color, lossless compression file. You only get 256 color, but one can be transparent. GIFs are best used for simple drawing, like icons and buttons. GIF can also be animated
PNG is a 16 million color lossless compression file that was built as replacement for GIF. This format allows for both pure transparency, as well as alpha level transparency. This transparency allow for effects like shadows. You can also put pictures in PNG, but they almost never compress as well as a comparable JPEG.
To use the external file on a webpage, you simply use the image tags source attribute to point to the address of the file:
<img src="http://www.example.com/i/logo.png" alt="AJS" />
Viola! You can also use relative addressing. So if this were my homepage, I could instead code as:
<img src="i/logo.png" alt="AJS" />
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The actual image file is never a part of the HTML file. HTML is a formatting language that can tell the browser to load an image. Common Web image formats are JPG, GIF, and PNG.
An image or graphic which is not a part of HTML needs to be imported. It needs to be imported inside the folder where HTML file is placed.
Images are not a part of HTML file at default. You have to import them to display in your project.
The <body> and </body> tags.
Images cannot be stored in the actual HTML file itself. HTML is always stored in a text file. Text files cannot store images. What will be in it is a reference to the image which enables the page to show the image, by looking to its location. When you open the HTML file in a browser, it will show the image.
Where is the HTML file on you blog?
The original extension of a HTML page was .htm because of file name restrictions that limited filetype extensions to 3 characters, today you can use 3 or 4 so either .html or .htm is perfectly fine.
Yes you need to put the file in the same directory. This will get the file to be executed from the HTML file.