There are three ways

1 (Recommended)
The solution which worked for me was to turn off https access. Regardless of what else was selected, the images refused to display until I created a standard http access and not https.

As stated above, Click on "Settings" (top right of the page), then "General," then scroll down to "Browser connection." The options there are "Always use https" and "Don't always use https." Choose "Don't always use https", save setting, logout or close browser and log back in with only http in the address bar, and images will display.

2. Alternate solution
When you click on a email and you get a "security warning box that ask..Do you want to view only the webpage content that was delivered securely... Yes...No."
The logical answer would be yes but if you answer No it will display the images at least for that session. I can't find a way to keep the setting. It started with IE8. See if this works for you.

3. Another Alternate
When you log onto G-mail at the very bottom of the page you'll see 2 icons you can click on, 1 item is Gmail view: and the other item is Standard view:. Click standard view and change to basic view. You have to be logged into Gmail not just your inbox in order to see those 2 icons. I hope this works for everyone else that had to deal with this frustrating problem. Good Luck.