How to Embed Image in Outlook Signature?

If you reference the image using a file:/// URI Outlook will automatically change it into a cid: URI and add the image as an attachment on insertion.

BTW: What has this got to do with programming?

EDIT: OK, considering your update to the question: I'm afraid this isn't possible. It's not a limitation specific to signatures or Outlook though. It's just the way HTML works. If you want images inside an HTML document these will have to be separate. No way around that without proprietary formats, none of which Outlook would accept as a signature.

However, if this is for an intranet application you can get away with placing the images on a network share and referencing via UNC, e.g.

<img src="file://///ServerName/ShareName/FileName.png" />

Is it possible to base64 encode the image?

<a href="http://www.britblog.com/">
    <img
        src="data:image/gif;base64,R0lGODlhUAAPAKIAAAsLav///88PD9WqsYmApmZmZtZfYmdakyH5BAQUAP8ALAAAAABQAA8AAAPbWLrc/jDKSVe4OOvNu/9gqA /..../NcV9/j5+g4JADs="
        alt="Signature" width="80" height="15">
</a>

Just a thought