The <img> tag is used to define images in HTML. It contains a src attribute to specify the image URL and optional alt text if the image fails to load. Width and height attributes can specify pixel or percentage dimensions. Images can be aligned within text using the align attribute with values of top, middle, bottom. The align attribute can also float images left or right of a paragraph. Additional attributes like hspace, vspace add spacing around images, and background inserts a background image. The <a> tag can turn an image into a link.