[eluser]pickupman[/eluser]
A common configuration when using Codeigniter is to have clean urls. This can present an issue for some users , and how they are used to creating links to images. Urls can be relative or absolute. A relative url is something like <img src="my-image.jpg" /> whereas an absolute url would be <img src="http://yoursite.com/my-image.jpg" /> or <img src="/my-image.jpg" />. A relative url will be from the image name being appended to the current directory in your address bar. Since CI uses clean url's, a relative path is trying to append the image path from possible a name of the controller or view folder which doesn't exists.
To check if this is your problem, first try using the full address to the image. <img src="http://yoursite.com/my-image.jpg"/>.
If you are putting your images inside of the application folder, they are being blocked from the .htaccess file located in /application folder.