Alt tags (or alternative text tags) are used to describe images that are used on a web page. They're used for a number of reasons, not least of which is to help Google identify what an image is (they're working on image recognition software but aren't there yet). You also need alt text present to validate your XHTML.
So what is an alt tag and how do you write one.
Well to answer the first part of this question I will refer you to the following video by Matt Cutts of Google:
As Matt tells us, the alt text shouldn't be too long and shouldn't have keywords stuffed in to it.
However, there are some hints and tips we can share to help you get the most from your on-page images. Before I get onto that however I'll make a very obvious statement. If you would like to optimise your images, think carefully about which images you select. The better, more relevant the image, the easier it will be to legitimately optimise your web pages' images with quality alt text.
1) Follow image search and type in your domain (eg: artdivision.co.uk). The images that are retrieved are the ones that have alt text.
2) Remember that the use of alt tags is not only for the benefit of Google spiders, but also for overall accessibility ie. for partially sighted people where a browser may read out the alt tag descriptions to the user
This will indirectly help your google ranking because you will be complying with accessibility regulations.
3) Make sure you save your file with an accurate description or keyword before uploading it. For example image1.jpg isn't much help. However, 'wavesonbeachinfrance.jpg' is much more descriptive.
4) Perhaps you won't be able to describe the image in the alt text. There are other tags you can use such as the longdesc tag.