Manual:$wgAllowImageTag

Details
Allow tag to be used in wikitext. This allows you to specify alt text and other attributes, copy-paste HTML to your wiki more easily, etc. However, allowing external images in any manner will allow anyone with editing rights to snoop on your visitors' IP addresses and so forth, if they wanted to, by inserting links to images on sites they control.

An example can be found at http://www.mediawiki.org/wiki/Extension:EmbedImg