People are working on sixel support for VTE:

<https://gitlab.gnome.org/GNOME/vte/-/issues/253>

There are more modern approaches:

<https://sw.kovidgoyal.net/kitty/graphics-protocol.html>

Not sure which is better, both seem a bit invovled. Sixel probably has a
slightly wider adoption, because XTerm supports it and, of course, it's
much older. But to be fair, you have to launch XTerm with a special
option.

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