@GregG It depends on the 'build action' that you specify in the image's properties. Your property probably has a build action of 'Resource' versus 'Content'. When you specify resource the image will be embedded into your assembly as a resource and is available under 'Resources...'. If you specify 'Content' (with an appropriate copy action) the esriaddinx will contain the jpg image file under the folder structure you use in your project file.
You can verify that the image files get attached to the esriaddinx file by 'unzipping' the file and looking into the 'Install' folder. You should see your jpgs under that folder: