Is is possible to display an image or icon in a Email using a Visualforce template?

Hi Deepak,

<apex:image> tag or plain old <img>.

It cannot be an image from static resources though.
If you want to use image hosted in your salesforce, best would be to upload it to Documents and tick the "externally available image". And then remember to use full path: https://{instance id}.salesforce.com/servlet/servlet.ImageServer?id={document id}&oid={your org ig}
Thanks