It can. See, for example, Notcurses:

https://github.com/dankamongmen/notcurses#readme

Demo: https://youtu.be/dcjkezf1ARY

Most emulate an xterm, which didn't have support for graphics. (And xterm itself is emulating an even older TTY … with features bolted on…)

There are some escape sequences you can feed to some terminals, though, that emit graphics. "Sixels" are pretty well known for pushing graphics to a terminal, but they're not universally supported.

iTerm2, on macOS, has a means of escaping and then sending a PNG, which is then displayed, IIRC. (But it's unique to iTerm2, and IIRC iTerm2 identifies as an xterm so it's basically impossible to autodetect.)

Pro answer: yes it can!

https://www.arewesixelyet.com/

Terminals started as TTY or teletype emulators. Everything else is an addon.

Yes it can as long as you avoid sixel and xterm. https://sw.kovidgoyal.net/kitty/graphics-protocol/