Matt Cutts has posted a new video about ALT tags in images. In it, Matt outlines the basics about how ALT tags should be used, and why they are helpful.
Matt starts the video with a picture of Amy Cutts (his cat) and a ball of yarn on a whiteboard. Matt then points out that search engine crawlers can't recognize the content of the image, and therefore have no way of understanding it what it is. To make matters worse, standard file names for the image are often something like "DCIMG42,JPG". This also provides no help to the crawler.
If we look more closely at a typical IMG statement, it might look something like this:
<img class="photo" src="http://www.example.com/images/dcimg42.jpg" />
Again, no help for the crawler there. SO what can you do? Matt recommends the use of the ALT atribute in the IMG statement. With this modification, your image statement might look like this:
<img class="photo" src="http://www.example.com/images/dcimg42.jpg"
alt="Matt's cat, Emmy Cutts, with some yarn" />
So now we are providing the crawler with some help. The alt tag in the example provided by Matt is 7 words long, and this is an OK length. Matt notes that if you start getting up to 20 to 25 words, that your ALT attributes are getting overly long. Also, you want to avoid spammy looking ALT attributes, e.g., "cat cat cat feline cat fur ...".
You can take this a little further and use the TITLE attribute, or name your file something helpful as well. This would provide more reinforcement for the crawler regarding the content of the images. However, according to Matt, just implemeting the ALT attribute is enough in most cases. Ultimately, the bottom line is that you should use the ALT attribute on ALL of your images.