What effect does image hosting have on ranking in Google?

If you publish your site frequently (more than once per day), then enabling image hosting may have a positive effect on your ranking in Google. Google appears to penalize listings when the image is not found. Since Google updates images throughout the day, some images would not be found between the time when you publish your site and the next, nightly data feed update. By enabling image hosting, image URLs will be static, and there will only be about half an hour of downtime should you re-publish your store.

The first time you enable image hosting, you may notice a temporary negative effect on your ranking, but that should clear up within two to four days as Google re-indexes your items. Note that Google's ranking algorithms are secret and change all the time, so the above statements regarding Google's ranking methodology are educated guesses.