The browser then displays it or picks the appropriate helper application. You may need to ask your server admin to configure this particular file with the MIME type you want. Browsing through a download directory can be quite a pain. And most browsers allow the user to download to disk if they want to. A thumbnail image is just a copy of the full-sized image that has been modified to reduce the size of the file.
Thumbnail images can use multiple techniques simultaneously.
Since many browsers display anchors with colored underscores by default, they will show the spaces to the left and right of the image with colored underscores. There are two basic approaches. The most cache-friendly method is to use a normal IMG tag that refers to a CGI script that randomly redirects the browser to one of several images. If your server supports SSI, the details can be found in your server documentation. Most likely you forgot to close a quote at the end of the SRC attribute.