Mail recipient is using another mail client- Whether or not an embedded picture is displayed as an attachment usually depends on the receiving client and not the sending client. While Outlook, for instance, won’t show additional attachments or the paperclip icon, Windows Live Mail does show the paperclip icon but does not show additional attachments.Considering the multitude of mail clients that are available, it is safe to say that other mail clients could behave differently and would show both the paperclip icons and an additional attachment while the message is received in HTML.

Mail is not received in HTML format but in Plain Text format- If the message is being received in Plain Text format instead of Rich Text or  HTML format, then all embedded pictures will be displayed as attachments and the picture will not be displayed in the message body anymore. Most email clients send HTML emails, as it is the most common email format. 

Virus scanner integration- There are known cases in which a virus scanner messes things up and the embedded picture will be shown as an attachment as well. This could happen on either your side or on the recipient’s side. Uninstall this part of your virus scanner and try again; you’d still be sufficiently protected by your on-access scanner part of the virus scanner.