I was clicking around today, and I noticed this page: https://www.google.com/adsense/adformats which shows that google can show an image instead of the normal text ads. Is this something new? Looking elsewhere around the help page, I don't see any other references to images. There certainly isn't a choice to show an image vs. a text ad. I haven't seen any mention of image ads on adwords either... +++Edited and added: so... my first post turns out to be somewhat of a bozo move. The answers to all my questions are here: https://www.google.com/adsense/faq#imageads1
its not new, I have seen the images on sites for quite a while. just havent used it because I got the feeling text links work better.
It's been around for quite a while..if you have read those emails that google send out regularly on updates, then you wouldn't have missed it.. You can select the option under adsetting/ad type.