This is so weird, that I am using gmail since so many years but never needed to embed an image while composing mail. This is very useful if you would like to insert / embed the images in the email itself at specific places instead of attaching those images. When I needed it today, I was not sure how so did a bit of research in my Gmail settings and found out the trick. So this how you can do it.
1.Check if you have ‘Rich formatting’ enabled.
2. If you already have it enabled, it will show all buttons except the one for inserting images.
3. Go to Gmail settings and then click on ‘Labs’
4. In Labs, there are various features waiting for you to try, search for ‘image’ or find out ‘Inserting images’ and enable the option and save it (save button is at the bottom of the page).
5. Come back to ‘Compose mail’ and look at the html formatting bar, it shall look like the one below allowing you to insert the images.
beds
Thanks for 9tip!