The data: URI (RFC 2397) allows the inclusion of small data items like images, text etc inline. It is quite useful for embedding small bits of data into scripts, as no external source needs to be referenced. In fact, I had come across the data: URI through a Greasemonkey script named Smilize which substitutes the usual smiley texts with images (embedded in the script using the data: URI).
There are a few sites which convert small images, html etc to the data URIs. There is one major drawback with the usage of the data: URI – it is not supported in Internet Explorer. So, for the time being its utility is mostly restricted to Greasemonkey and Opera scripts, till IE support is available (maybe in version 8?).
P.S.: I came across a new addon for IE 7 – IE7Pro – which provides userscripting functionality plus some other features like Ad blocker, mouse gestures etc.
AB's Reflections 