how to use image for next previous link in pager in drupal 7
In template.php

function THEMENAME_pager($tags = array(), $limit = 10, $element = 0, $parameters = array()) {

}


http://api.drupal.org/api/drupal/includes!pager.inc/function/theme_pager/7

For api please check above link you can overridden.   also check below link.

In drupal 7, How to override theme_pager?