Like most other recent enhancements, “insert images” is an optional feature that can be found in Gmail Labs
1. Take “Settings” -> “Labs”
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2. Find & Enable "Inserting Images" & Save Changes ( You can find 'Save Button' bottom of that page. Gmail will restart automatically.
3. Once enabled, you’ll get an insert image icon when composing a message (if you’re in rich formatting mode), and can then select an image either from your desktop or from a URL.
Have fun
Never Forget to Thank Me
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