How do Paperless Post and other email senders get images to display in emails when recipient hasn't given permission and Gmail says "Images are not displayed"?

it is possible to "embed" and image. Most marketing emails host images online and the code in the email refers to that image in the same ways a web page does and gets blocked by Gmail etc. Outlook and Thunderbird users for instance will know that you can add an image from your own computer to an email and send it to someone - this does not get hosted on line, it is a kind of attachment, but is embedded. this will mean the code for the entire image in the HTML code and can be seen in the code view and a massive block of numbers and letters. It will render immediately but content filters hate them, not only does it make the email very heavy, due to the increased amount of code, but also spammers have abused it over the years and it is very unpopular for content filters and is a no-no for bulk marketing emails. this is essentially the long answer John's below, where I saw embedded and not referred to, John says in the body and remote. If the sender was sender score certified gmail would not care, it is not part of the senderscore network. tracking images still seen as remote images so are stil blocked until the user clicks to allow - in inboxes where images are blocked first.

Some companies are senderscore certified. This is a long process of essentially proving that you're a provider of quality content and as such have your images displayed by default in some popular Web clients. Also embedding images would have the same effect, however the size of such emails would raise some deliverability concerns.

They display images that are included in the body of the message, don't display images that are on remote servers. (I just checked.) This text added to satisfy a robot that thinks that long answers are better than short ones.