This directory holds bitmaps (JPG, PNG, ...), to be used with \includegraphics{}. If there's a file abc in here, include it in the document with \includegraphics{abc}:

• no leading path (includegraphics knows to look in here),
• no file suffix (includegraphics looks for the common ones automatically).

PDFs files (even if they're vectors) also go in here and are usable via \includegraphics in the same way.