This is better in v3, but not 100% perfect (in my opinion). Here's what happens as I understand it...
When you create a new image in the media section and upload your image, umbraco will save the image and a thumbnail of it to the filesystem in a uniquely-numbered folder.
If you delete the media item's node from the media section the image is deleted.
If you update the image by uploading a replacement image to the existing media node, then umbraco will replace the existing file on the filesystem *if* the uploaded file has the same filename as the existing image. That is, umbraco will over-write the file if the replacement image is the same name as what is already there.
But if you upload a replacement image to an existing media node and the replacement image's filename is not the same as the existing image... you will end up with two images in the uniquely-numbered folder on your filesystem. It is in this way that your media section can grow.
The best approach, then, is to either delete unused nodes and make new ones, or to be sure you always upload images (or files) with the same name as what's already there so that the outdated files get over-written with the replacement files.
cheers,
doug.
MVP 2007-2009 - Official Umbraco Trainer for North America -
Percipient Studios