All attributes from the normal <img /> can be used. The idea then is to let different providers help generate the correct src attribute, based on the parameters given by the user. The reason for using an options attribute for input to the provider, is that you might want the server to render the image at a certain size, but not actually have the width attribute on the rendered image.
I have restricted it to images for now. It might be possible to create an umbraco:Media that would handle videos or sound as well, but I think images are the most valuable thing to operate with.
I have created some samples of how I think it could be used.
<umbraco:image runat="server" field="myImage" width="200" height="100" />
Outputs image from current page
<img src="/media/12345/foo.jpg" width="200" height="100" />
<umbraco:image runat="server" nodeid="1234" field="myImage" width="200" height="100" />
Outputs image from page 1234
<img src="/media/12345/bar.jpg" width="200" height="100" />
The thumbnails that Umbraco Upload datatype will create
<umbraco:image runat="server" field="myImage" options="thumbnail=100" />
Outputs
<img src="/media/12345/foo_thumb_100.jpg" />
The thumbnails that Umbraco Image Cropper datatype will create
<umbraco:image runat="server" field="myImage" provider="imageCropper" options="property=crops&crop=smallCrop" />
Outputs
<img src="/media/12345/foo_smallCrop.jpg" />
The Rendering the image on the fly with ImageGen
<umbraco:image runat="server" field="myImage" provider="imageGen" options="width=200&height=100" />
Outputs
<img src="/umbraco/imagegen.ashx?img=/media/12345/foo_smallCrop.jpg&width=200&height=100" />
The Rendering the image on the fly with ImageGen
<umbraco:image runat="server" src="/css/logo.jpg provider="imageGen" options="width=200&height=100" />
Outputs
<img src="/umbraco/imagegen.ashx?img=/css/logo.jpg&width=200&height=100" />