The suggested edit https://stackoverflow.com/review/suggested-edits/979182 (both in rendered and markdown diffs) shows a URL to an image:
Screenshot of output: http://i.stack.imgur.com/UoMlt.png
I wondered why the screenshot had not been embedded, so I clicked on Improve, only to find that the code had changed to the following:
Screenshot of output: ![enter image description here] : http://i.stack.imgur.com/hUdRB.png
https://stackoverflow.com/posts/13343811/revisions also shows it embedded and shows the above in the markdown diff.
Is there some sort of auto-conversion going on? I couldn't find anything relevant in the help.