Sam Ruby puts inline SVG on his blog. SVG is a language for describing scalable vector graphics. Browsers that understand SVG can render the graphics directly rather than downloading a raster-based image with another HTTP GET. Because its tags, you can manipulate it using Javascript. Check out this circle editor from Kevin Lindsey, for example. Just Javascript and SVG.

If you're going to serve inline SVG, you need to configure your Web server accordingly, so that browsers get the right stuff. I also believe, although I'm not certain, that you'd need to make sure the entire file it's in is XHTML compliant. One more reason to make that leap.

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