That dialog was much along the lines of "We'll now show you images in your email automatically." with a big "OK" button.
I don't recall whether there was a less prominent "No, thanks" as I was only logging on to reply to one question really quickly.
I suspect this is a UX anti-pattern. I've gone back into my settings and changed it back to "Don't display images".
+1
If you accept the new default, it's far easier for them to track you, because Google will kindly be loading their tracking images on your behalf when you open the email, every time.
Gmail has done this enough times around already for to me become a UX anti-pattern in itself.
It's weird to look back to the days people were begging for invites and Gmail was the best game in town. These days the few times I'm forced to use GMail it almost makes me rage.
The "normal users" I know which are forced to cope with Gmail are constantly and consistenly confused, asking me where things they used to know have gone, and why Google is ruining Gmail.
Glad I migrated to something better, somewhere where I know for a fact that I am the customer, not the product.
Once you try using fastmail, you will be surprised by how incredibly lightweight it is. When you first get used to that, trying to use Gmail feels like wrestling a horribly bloated pig. The UX has just become terrible.
As for fastmail or other options... I was very keen on being able to host things 100% myself, preferably using FOSS, because of privacy concerns and being in control of my own data.
After trying out various FOSS (and non-FOSS) solutions I decided none of them were good enough/polished enough for my needs.
In that regard fastmail is a compromise for me compared to what I ultimately want, but it's a compromise I'm more than happy with.