QUOTE (wwm8rtial4 @ Jul 19 2008, 10:59 PM)

Alternate text is the characters that will be displayed for (or replace) a broken image. So, if your image isn't available, then a blank box will appear and the text that you have added in that "Alternate Text" field in the MCP.
The Image Caption is the text that is displayed with a good (un-broken) image.
Partially correct.
Technically speaking, "alternate text" is the "alt" tag on the image. It will be displayed if the image is not found, and in some browsers (Internet Explorer, specifically) it will display if you mouse over the image.
The "caption" is applied to the image as the "title" tag. This text will also display when you mouse over the image, and will take precedence over the alternate text. Additionally, the caption will display at the bottom of the detailed image in the popup window.