For emails that have pictures, Thunderbird doesn't display the pictures, saying that it's protecting my privacy.
How is it protecting my privacy by not displaying pictures? Pictures are things I am receiving, not sending.
When anyone loads
tracker.jpg from that server, the e-mail sender can see that the image was loaded, what IP address requested it, and the exact date and time it was requested (also if it has been requested more than once.) With this information the sender can learn the general physical location and exact date for each time the message is read.
The sender can further identify who loaded an image by adding URL parameters to the embedded image address (e.g.
http://www.example.net/tracker.jpg?targetID=Bob%20Johnson&msgID=123456&sendDate=07012012.) An arbitrary number of parameters could be passed and they would all wind up in the server's logs along with all the other information.
The specified image needn't even be a valid image, either. It could be a specially crafted file that exploits image rendering bugs in a particular e-mail client, or even a program that sends a different exploit image based on what sort of e-mail client is asking for it.
"But," I hear you saying, "my web browser does all of those things already and no one says that it's dangerous!" And you're right, no one says it's dangerous even though every single one of the above dangers is just as valid for web browsers as it is for e-mail clients.
The big difference is that an e-mail is targeted at (usually) a specific person or organization: if you send a booby-trapped e-mail to every account at
cia.gov, you might just be able to break into the CIA's network (one hopes the CIA leaves remote content blocked.) This sort of targeted attack is similar to spear phishing and has been used successfully to break in to even the most technologically savvy of companies (i.e. Google.) Note that this sort of attack is not limited to spear phishing alone.
So, basically, what it boils down to is that Thunderbird is playing it safe. It won't automatically load remote content but gives you a nice big button to press if you trust the sender.
For example, displaying pictures inside emails allows a potential attacker to know your IP.
It suffices to include the image
http://attacker.com/picture.png?limitless in an email sent to your address. Once your client displays it, your email address has been succesfully linked to your IP.