The applet above loads the images from a jar file. The top image is an actual Image painted on a JPanel, and the bottom image is just an ImageIcon added to a JLabel.

Basically, to extract an image (or anything, for that matter) from a jar file, just use the

this.getClass().getResource("filename-of-the-image.jpg");

getResource returns a URL which points to the image in the JAR file.