The expected behavior for .jpg files when uploaded to a custom field of type = file is that the image will be displayed on the contact summary screen. This works for some .jpg files and does NOT work for others. In the 2nd case, only a link to download the file is displayed.
Hopefullly we can figure out what causes this and get more consistent results.
There have also been reports on the forums of png files NOT working as expected. The intention is that .gif, .jpg and .png files all display the image.
I've attached an example of a .jpg that works as expected an one that does not (tested on trunk sandbox).