In the main Snagit window, click Tools > Program Preferences > Program Options tab and make sure that both "Paste images as HTML for Outlook Express" and "Embed images when sending e-mail (Outlook/Outlook Express only)" are checked.
If you are using Outlook and your images are attaching and not embedding, and both of the options are checked in the Snagit properties, make sure that the email composition is set to HTML and not Rich Text or Plain Text. As a test, you can copy/paste an image from another source and try to put it into the body of the email as well and see if it accepts that image or not. If it can, then Snagit should be able to embed as well.
Some webmail clients (like Yahoo! and Hotmail, for example) are not supported as they cannot embed images the same way that an installed one such as Outlook can. These clients do not support embedded images and you will have to save the file first and then attach it to send it.
When email clients send a message, any included images are sent as a attached files. The email message can specify to show that image in the body of an HTML email. However, the recipient can configure their email client to show only plain text, and some email programs or webmail sites cannot show HTML mail with embedded images at all. In these cases, the image will be an attachment regardless of how it was sent.
Some companies choose to strip email attachments including images for security reasons; in that case you would not be able to email images to those recipients at all. We recommend uploading images to a screencast account and sending the share link if email doesn't work.