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upload_image.module takes uploaded images, that are attached to nodes, and creates image nodes from them. Thumbnails are shown in place of the file name in the list of attachements.

From the end user's point of view, upload_image works as follows:

1) attach image as an attachment
2) select "list"
3) do the same for more images if you want to
4) submit

Each attached image will be made an image node. The thumbnail of that node is shown in the attachment list and links to the node. The author of the blog can then edit the image nodes and add more info about the picture.

The module depends on both upload.module and image.module.