Does anyone know how copyright laws on images on websites works? I'd never given it much thought till a friend of mine found himself with a £1000 fine from a company in the US for using on of their images in a site he created in the UK. They aparantly have software that can tell if an image hosted somewhere else belongs to them. How do companies copyright their images without stamping it on the image? And are they then able to fine another site for using they're image?
In the US copyright exists the moment the work is created, and (although I'm not sure about the UK), US copyright holders have no obligation to include an actual copyright mark / notice on it. And on a side note, please keep your copyright questions to the legal issues forum. They do not belong in the copywriting forum (completely different things).
Yes of course, however my knowledge is limited when it comes to website content. I've oftern seem images with buit in copyright (e.g. copyright text watermarks etc) which obviously your can't copy but I take it all images on the web are now copyrighted to someone or some company and as such doing an image search in google and downloading any of the results is illegal - is that a fair assumption?
Yes, that's a fair assumption. Unless there's a blatant license saying that you can use it, assume you can't (subject to fair use and such of course).