Brent Catlett, this afternoon I learned that you can now insert images into your Google Forms. Brent posted some screenshots of the process. After trying it out myself, I created a short video of the process. The video is embedded below.
Applications for Education
Inserting images into Google Forms could be a great way to create quizzes in which you ask students to identify people, places, and things.
This feature has not been rolled-out to all users, yet. If you're a Google Apps for Education user who still has the old Google Forms layout you won't see this option.
Click here if you want to take the quiz that I made in the video.