<pedantic>
That's alt attribute shabbir 
</pedantic>
(pet hate btw, calling attributes tags)
It's accurate to say that alt attributes do help with rankings, they are treated in the same way as anchor text for linked images and as body content (seemingly) for unlinked.
The alt attribute text as shabbir points out is also rendered in place of the image to any user agent that does not display images, text browsers, screen reader etc so it should be a descriptive phrase for the target page including a keyphrase that the page is optimised for. On unlinked images it should be a sentence describing the image.
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Chris. ->> Links are advertising NOT optimising!! <<-
A foolish consistency is the hobgoblin of little minds
Thought for today:- I SEO the only industry where all the cowboys are Indians?
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