Hi Steven,
Currently, only images from data types can exist within the grid. All other images float on top of the grid, and you can "fake it" by following the steps provided by Mukesh.
Here's an example on how to insert a country flag into the grid using the Geography data type. After applying the Geography data type, click the in-cell button that looks like a modesty screen to display the data pop-up. Mouse over the image content and click the Extract image to grid button.

You will then see the image and it is actually within the cell. Select a cell having an image and you can see in the formula bar that it is a cell formula.

As this is relatively new functionality, you can see where Microsoft is going with this. My hunch is that at some point relatively soon we will be able to use cell formulas to directly insert pictures, perhaps from web pages or local files and have the pictures live inside a cell.
Because this functionality is new, right now would be a good time for you to think about pictures within cells in the grid. What kind of pictures (.jpg .png etc) would you want in the grid? How would you get them into the grid (cell formula? Paste?) What options would you want to have for pictures in the grid (use in cell formulas? treat as picture objects?). You can share you thoughts in replies, and when you feel ready, you can share your thoughts directly with Microsoft using the Excel Menu Bar and choosing Help > I Have a Suggestion.
Here's a video that shows how to use a cell formula to display pictures that float above the grid:
https://youtu.be/S36EITzqSU0
Here's another similar video, but with a twist
https://www.extendoffice.com/documents/excel/4025-excel-dynamic-image-in-cell.html