The ArcGIS Server Image Extension allows you to manage, process, and quickly serve large quantities of raster data for visualization and analysis to a variety of clients. The online help article: An overview of the ArcGIS Server Image Extension includes a section on Key Features. The article states “One of the most important key features of Image Extension is on-the-fly server-based image processing. The Image Server resolves bottlenecks in conventional image-processing workflows by enabling the raster datasets to be stored directly as files on servers, then processed and distributed directly without extensive preprocessing or loading of the data into a database.” The key phrase in this statement is extensive preprocessing, while you do not necessarily preprocess your data, there is some preprocessing that you should consider before publishing your imagery. Preprocessing will allow the organization to achieve maximum results and performance especially if imagery is to be deployed via ArcGIS Server Image Service to be used in conjunction with the ArcGIS Server Rest API, ArcGIS Server API for Flex, ArcGIS Server API for JavaScript and ArcGIS API for Microsoft Silverlight™/WPF™.