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As far as I know:
With Mozilla, title attributes are used for both links and images.
With IE, title is for links and alt for images.
If you want them to appear for images in both Moz and IE, use both the alt and title attributes in the image tag.
There's more on the history of the things on various sites on the net.
Use the alt attribute for text that should be displayed if for some reason an image isn't displayed (e.g. the user has images turned off). This text should describe the content of the image in a way that will help users who don't see the image understand what it is for. If the image is just an interface graphic that doesn't need text to describe its content (e.g. spacer.gif), leave the alt attribute empty like this: alt=""
Use the title attribute to give extra information about the image, such as its title. You can in fact use the title attribute in this way for any HTML element, not just images. Think of it as a kind of elemental metadata.
IE will display alt attributes as a tooltip even though it shouldn't, which has resulted in many people using alt when they should be using title.
Use the title attribute on links. This gives some pop up tooltip text to help the user who was about to click that link.
Until MS gets around to eliminating this IE 6.0 'bug' (and may have already in the very recent update - news there?), any 'alt' attribute you give a photo will show up if you move the mouse over it. If you also have a title tag, the title tag takes priority over the 'alt'. Thus adding an 'empty' title tag will show... nothing.