Forum Moderators: open
<A HREF="http://www.heftywidgets.com/">Widgets</A>
is better. The content of the link will help more than the alt on an img. Real content is always better than alt content. I would assume the same rules apply. Though that is in regards to spiders but for end user referrals would an image be more attractive and promote a higher CTR?
You could use the image version in order not to upset the relevancy of the page, and you could use the text version to improve the relevancy if it is not well covered by your body text.
If you are trying to improve the relavancy of the page that the link is on for the word "widgets" I'd go with the text version.
Also, keep in mind that if the linking text "widgets" is not directly related to the page you are *linking to* you can mess up that pages relevancy a little. In that case go with the image with appropriate alt text.
I'm thinking of taking the <IMG> route so that I can load an ALT tag with the proper words to boost relevency.