How to hide files in JPEG pictures
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http://www.online-tech-tips.com/computer-tips/hide-file-in-p...
The images are even hotlinked from the original.
Second: If this works it might be possible to distribute hidden files through profile pictures (one facebook and friends) :) I'm glad I never store original jpegs in my web projects, but rather saved processed versions (resized etc).
2. Bookchan uses that method to distribute ebooks. People simply post the book cover picture with the ebook attached in .rar on an imageboard. (eg. http://bookchan.wikidot.com/mario-puzo)
Base64 has proven to be a great source of amusement for me. Free picture-mail on my cellphone without paying for it. Harassing my still-learning brother. ("hey, run this python script.", has a GIF file stored in the source in base64, pops it up in a tkinter window.)
There's a nifty app somewhere that allows you to print files to paper, not base64, but something else, I forget the name though...
Several years ago Neils Provos wrote several papers and tools for detecting this content: http://www.citi.umich.edu/u/provos/stego/