Can I send an email with a picture in it instead of attached to it?

Before I even start talking about how to embed your favorite Lolcat in an email, I should warn you that most modern email platforms automatically disable embedded pictures.  The recipient has to select to view embedded images in their emails, so it is always a good thing to include information about the picture they may be missing.

Source: Gmail

To embed an image in gmail, first you must be using the new compose experience.  If you are using the old compose experience when you hit compose, the page reloads and your email draft is now in the composition field.  At the top of the email there are some blue words to try out the new compose experience.

When you click that link, Gmail will refresh and you now have additional options when you compose an email.  Some things look different, don't get scared.  If you don't like it you can change it back.

For more information on the new features check out the support page.  

Once you have a new compose email up, inserting a picture is easy.  At the bottom of the compose window is a "+".  Hover over that and a camera icon will appear.  That is the button to insert a pic.  The email can be formatted in the same manner as a word document by clicking the "A".  

Soon the options to insert emoticons and calendar invitations will be available.