How to display term images instead of term names in the term selection process?
Looks like the Taxonomy Term Reference Tree Widget module gives you the ability to add images to term references. Here is a quote about it (from the module's project page):


  ... provides an expandable tree widget for the Taxonomy Term Reference field in Drupal 7. This widget is intended to serve as a replacement for Drupal's core Taxonomy Term Reference widget, which is a flat list of radio buttons or checkboxes and not necessarily fit for medium to large taxonomy trees.