You can include an image via the <image> tag, using the @source attribute to provide a filename, likely prefixed by a relative path from the top-level of the appropriate directory. Read Section 6.6 for details on how to set these directories correctly. If you are starting a new project, using the PreTeXt-CLI (with the command pretext new book, for example), then most of the setup portion is done for you and the top-level folder for images that are created external to the project is called assests, and it is a sibling of the source directory. It is your responsibility to locate that file properly relative to this directory, and that the file format is compatible. So, for example, suppose your source contained <image source="ch2-images/butterflies.jpg"/>. Then you would want to have a directory named c2-images below wherever you set the @external top-level directory, and you would place the butterflies.jpg inside of it.
The @width attribute can be used to control the size of the image. Widths are expressed as a percentage of the available width, such as width="60%". Instead of a width, you can also specify margins and the width will be deduced.
You may want to wrap your image in a <figure> to have it centered, and to have some vertical separation above and below. A <figure> must also have a <caption>, and the figure will be numbered.
You can also place an “anonymous” image (no caption, no number) almost anywhere you might place a paragraph (but not within a paragraph). Note also that the <sidebyside> tag provides some very flexible options for placing several images (Section 4.18) together, or combining figures with subcaptions.
If you wish to construct technical diagrams, with editable source, and perhaps including the use of macros, PreTeXt provides support for authoring with graphics languages such as Asymptote, TikZ, PGF, PSTricks, and xy-pic in addition to using Sage code to describe a plot or image. In most cases output can be obtained as smoothly-scalable SVG images, in addition to other formats like PDF or PNG. Making all this happen is one of the more technical aspects of PreTeXt, so read the details in Section 5.14 along with frequent references there to the pretext script described in Chapter 48.
For accessibility, every <image> should either have a <description> child, or it should explicitly declare itself to be a decorative image setting @decorative to the value yes. A description should minimally describe the important information in the image that is not already present in the surrounding text. Some screen readers may cut off reading a full descritption after the first 125 characters. For a complex technical diagram or an image from which the reader is expected to extract important information on their own, it can be challenging to write a description with the 125-character limit. It may be advisable to seek advice from an expert.