Here is a paragraph element,
containing a non-floated inline IMG element.
The image appears inline with the text, and sticks up
above the top line (as per the default text-alignment).
Here is a paragraph element,
containing a floated IMG element - the element is
floated to the left. Note how the image is flush with the
left edge of the paragraph it lies within, that the top
of the image aligns with the top of the paragraph box,
and that the text flows around the image.
Here is a similar paragraph with the same floated
image, but this time with padding added to the image.
Note how the padding "pads out" the region around
the image, and displaces the adjacent paragraph content.
A border would have the same effect.
Here is a similar
paragraph with the same floated image, but now the image
has negative top and left margins. this pulls the image
outside the bounds of the parent element.
Here is a similar
paragraph with the same floated image, but now the image
has negative bottom and right margins. this pulls the
bounding box in, and pulls the text boundaries right under
the floated image.