Microsoft's Visual Studio Code marketplace displays the contents of the README.md file in the extension package. See, for example, the Time Travel Debug for C/C++ extension.
There are two approaches to including images in the extension description: (i) include the images in the extension package and then "provide relative path image links in the README.md"; (ii) publish the images on the Internet and link them in the README.md. Approach (i) unnecessarily increases the size of the extension package and the download time; accordingly, we prefer approach (ii), with the images stored in this repository on GitHub and available via raw.githubusercontent.com.