By default your server will always look at the root directory. (base href) Unless you tell it otherwise.
If your file is in /images then it will look in domain.com/images for the file. With or Without the base href!
Now if your page is in /images and your file is in /photo then it will look in its root directory for the file. Which in this case would be /images !
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Most hints on the net say to use absolute paths when you link your style sheets and images on sub domains, but this will come to bite you if you have masked domain names or you change your domain name completely, leaving you having to update every single absolutely linked file on your website.
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Even if you use the base href tag, when you change your domain name you still have to go back and change every base href tag on every page of your site. So where are you really saving time?
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