The Doxia Book code currently only supports the iText module for generating a pdf book.
You can use the same graphics formats as are supported by the chosen implementation, eg see Apache FOP Graphics Formats and iText Images. You should probably take care of image resolution, see bellow.
This is most likely a resolution problem, for instance your image was saved with a 72 dpi resolution. Try to use an image with a higher resolution, like 96 dpi. You could resize your image whith this program: gimp. This is the only solution if you include the image from an apt source file (since in apt there is no possibility to specify the size of an image), if you are using xdoc, you may additionally indicate the size of the image using the width/height attributes of the img tag.
If you are using apt then your images will always be block-level elements, ie they will get centered in a separate paragraph. Apt does not support in-line images.
Using xdoc you are more flexible. By default a simple <img> tag can be used for an in-line image, eg:
<p> Here's a little icon: <img src="image.jpg"/> inside my text. </p>
If you want your image centered you may put it explicitly inside a centered paragraph:
<p align="center"> <img src="image.jpg"/> </p>
or you may use the Doxia-specific class attribute in a surrounding <div> block:
<div class="figure"> <img src="image.jpg"/> </div>