Shamelessly ripped from another NG:
Click Start, Settings, Control Panel, Internet Options
Click the "Advanced" tab, Scroll down to "Multimedia",
check "Show pictures", and uncheck "Show image download
placeholders". Click "apply", "OK"
Also click the "General" tab, Under "Temporary Internet Files", click the
"Delete Files" button, check the box, "Delete all offline content", "OK".
After it finishes, click the "Settings" button and lower the amount
of disk space to use to 20 Meg. Click "OK", "Apply". That will increase
your hard drive space by how much was in that folder. I've seen it well over
a gig. Folders that big are prone to crosslinked files.
Clear it weekly, or sooner, especially if IE starts acting funny.
Also click the "Advanced" tab, scroll down to "Security", and check the box,
"Empty Temporary Internet Files folder when browser is closed", click
"Apply", "OK"
For web images: How Internet Explorer Cache Settings Affect Web Browsing
http://support.microsoft.com/?kbid=263070
If that didn't fix it, then check here:
Images Are Not Displayed Properly in Internet Explorer
http://support.microsoft.com/?kbid=176945
Internet Explorer Does Not Save Graphics Files in Proper Format
http://support.microsoft.com/?kbid=260650
Right-Clicking, Selecting 'Save Picture As' Does Not Save
Image with Correct Extension
http://support.microsoft.com/?kbid=250747
Internet Explorer Saves Images As Bitmaps (.bmp Files)
http://support.microsoft.com/?kbid=810978
Web Accessories Functionality Turns Off Image Downloading
http://support.microsoft.com/?kbid=223050
Problems Displaying Images in Internet Explorer
http://support.microsoft.com/?kbid=181836
Pictures Are Not Displayed on Web Sites in Internet Explorer
http://support.microsoft.com/?kbid=283807
Images & Pictures - Internet Explorer
http://www.generation.net/~hleboeuf/ieimage.htm
Can't see jpg's or gifs - Red X - images missing
http://www.mvps.org/inetexplorer/answers.htm#jpg_gif