While it is possible to store your images in the database using the large object interface, it is by no means an optimal solution. When 7.1 comes out, you should be able to store images without the awkwardness caused by the large object interface.
Basically, the large object interface was conceived a while back as an answer to the very small 8k block size postgresql defaulted to. Even with the ability to (theoretically) increase the block size to 32k, this is still too small for many images.
If you want good performance, then storing large binaries in your database is a Bad Thing (TM :) because postgres, like most databases, isn't designed as a high speed general purpose store, but as a high speed datamanipulation engine, which excels when munging several datasets together, but pales in comparison to even the slowest file system for just storing data.
A better, or at least much faster, method is to do something like create a directory to hold all your pictures, and create a hierarchy for it based on something like year/month/day or something to keep the directory structure small and fast. Then just store the path/filename in the database and you can just access it that way.
