Providing image inline linking

Purpose
The purpose of this article is to present a balanced discussion of image inline linking, as a counterpart to a sister article, which focuses only on the prevention of inline linking, aka "hotlinking." To limit scope, images are used as the example, but similar considerations apply to other object inline linking. Good and bad examples, and advantages and disadvantages of using, allowing, or blocking image inline linking are also welcome here.

What is "hotlinking?"
There is not universal agreement on the definition of the term "hotlinking;" however, the normal definition descibes it as the act of including an object in a web page by means of an active link to a remote resource. At Wikipedia, there are (currently) 2 related pages, Hotlink and Direct linking, that attempt to define the term. These articles may be merged as Inline Linking.

What is image inline linking?
In simple terms, we are talking about using something like:

in a web page on some other web site you can add that to. You can "tart" it up by including  attributes, titles, sizes, borders and such, but displaying an image is the basic function. You can also do this with other image files, like GIFs or PNGs.

Image inline linking is related to text, screen or web scraping, which are commonly used techniques of including excerpts of information from one web site into web pages on another web site. These practices are sometimes considered "fair use" of published materials. Image inline linking is a simple method for presenting an image file from one web site onto another site. It is simple because simple HTML provides the capability, and it is obviously consistent with the original intent of web designers.

There are many benefits of image inline linking, such as providing information to the image owner on how their image is being used, minimizing storage by avoiding having duplicate copies of the same image files on different servers, coordinated user tracking, and advertizing. Unfortunately, the benefits can also be perceived as drawbacks. These details will be discussed below.

What is undesired image "hotlinking?"
Undesired image "hotlinking" is when the person who owns the rights to an image, and uploads their image to their web server, objects to the presentation of the image on another web site through use of standard HTML functionality. Undesired image "Hotlinking" may be considered a form of bandwidth theft, although the legal standing is unclear. Recent major court cases (Perfect10 versus Google) involved image inline linking and thumbnails, but there were no allegations of "bandwidth theft." Basically, when creating a web page it is easy to link to a file (such as an image or a video) that exists on a remote (completely separate) site. Unless cached, each time the web page is accessed, the file is retrieved from the remote web site.

Consider this example: You have created a personal gallery of cherished images. Someone else likes one of your images, so they post a "hotlink" to that image on a popular forum that they visit. Now, if not cached, that image is plucked from your web server every time that page of the forum is viewed. If on a popular, high-traffic forum, it can quickly add up to thousands of requests, eating into your "precious" bandwidth allocation. To make matters worse, if the image is popular, it may appear in other forums.

And to make things even worse, those forums may require a registration fee, or a copyright infringement notification, for you to see how your image that you are hosting is being used.

It is not all bad, however. Once your image is hotlinked to another site, you implicitly have permission and capability to take advantage of that presentation by including a copyright mark or other modifications, or even other images. It also provides you with information on the spread of your image, and gives you "web bug" data for browsing at other sites than your own.

Discouraging image inline linking
A sister article offers a relatively simple, technical method for discouraging unwanted hotlinking. It assumes accurate referer information from browsers, and therefore can fail to work as intended. It can even ruin a site by blocking images for "legitimate" visitors. Referer addons are available for Firefox or Internet Explorer, and some firewalls provide similar referer controls.