Image tracking occurs by insertion a small imperceptible image throughout your website. When the image is loaded, the visitor is tracked, and can be tracked on your landing page and your conversion page.
The problem with image tracking is that the image is usually invisible, which can cause some search engines to penalize the site’s natural rankings because of the use of something the end user can not see. In most instances, this is not much of a problem as search engines are getting smarter as to how they read code. This ought to not influence your rankings on the major search engines, this problem usually only occur on search engines with lower technical standards.
The second difficulty is that if the user does not have images enable, the image will not be loaded, and can cause the tracking chain to be broken.
The third problem is the same as the java script problem (above) of not tracking lifetime and returning visitors.
The advantage to image tracking is that less conflict occurs between other tracking systems so if you use both a pay per click tracking system, and a universal visitor tracking system, they usually display a greater accuracy than two java script systems.