The standard markdown syntax for inserting an image is:

Note the exclamation mark at the beginning.
Obsidian also has allows us to use a ‘WikiLinks’-style shortcut, which is just:
![[image.jpg]]
When using the standard markdown syntax - or straight HTML like in your example - you have to URL-encode any non-allowed characters. That means, for example, that if you have a file named “my image.jpg”, the space in its name is going to cause problems, and you need to escape it, like this:

Images are usually displayed at their original size, or follow whatever the current CSS styles are for images in your Obsidian theme. MultiMarkdown - and extension to standard markdown - does allow us to add extra attributes to image and link elements, but I’m not certain Obsidian supports this yet.