Windows 7: Image thumbnails fail to appear

Checking Always show icons, never thumbnails (in the folder options menu you see in the asker's screenshot), applying, unchecking and applying again, solved the problem for me.

Edit 9-12-2014: Additionally, if you go to Advanced system settings and enter the Performance settings tab, ensure that Save taskbar thumbnail previews and Show thumbnails instead of icons are selected in the available check boxes. This affects all folders globally, rather than doing it for each folder.

I recently had this problem, here is my solution:

1. Open a command window as Administrator
2. Open the task-manager (CTRL-SHIFT-ESC)
3. Kill explorer.exe
4. Go to your command window
5. Type: cd %userprofile%\AppData\Local\Microsoft\Windows\Explorer
6. Type: del *.db
7. In the task-manager go to File -> new Task
8. Run explorer.exe

I have some suspicions that the problem began due to low free disk space on the root drive (C:)

Thumbnail generation is initiated by explorer.exe, but applications can register themselves to create the thumbnail. An application simply has to implement http://msdn.microsoft.com/en-us/library/bb774614(VS.85).aspx as a COM object.

For instance, when you are installing the Combined Community Codec Pack you have the option of letting Haali (I believe this is the component) of taking over generation of thumbnails for video files. Thus thumbnail generation is the responsibility of Haali.

Search under HKEY_CLASSES_ROOT and you will see many thumbnail providers (for example XPS and Office Documents).