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The images are not a clickable link; they are just sourced from my site's url.
On most of my sites, I prevent hotlinking to save bandwidth. But should I rather encourage it, if it helps with the overall popularity of my site?
Do hotlinked images count as links?
Yes, but as links to the image itself, not the a page, so could help with image search. IIRC, Site Explorer shows many types of links that won't give any SEO benefit, including those with nofollow.