what I mean is.
consider the path
< img src="../yurt.jpg" alt="Pacific Trails Yurts" width="295" height="215">
this doesn't work, because the link is located at c:\websites\pacific\pages, and is just ../ (go up one) so it's looking for the image file in c:\website\pacific\yurt.jpg and failing.
using an absolute (Pacific/images/yurt.jpg) instead of relative (../images/yurt.jpg)
will work, however, if your relative link is correct, both ways will work, (provided you don't go out of the site*)
when you say that your images are located one folder up from your page data it sounds like your folder stucture is
c:\websites\pacific\images\pages\main.html (then just linking ../yurt.jpg should have worked!)
*when I say don't go outside the folder I mean that you have a thing configured either as a source directory in IIS or as a document root in apache.
if c:\websites\pacific is the document root for the pacific website,
no matter how many ../'s you put you can't traverse up the tree further than the document root.
so when you land on the site you land at c:\websites\pacific\index.html you can't run ../../windows/system32/cmd.exe!
but also you can't use data from other sites.
so c:\websites\pacific\index.html can't load objects from
c:\websites\atlantic\images\ because they are different websites, -linking using /atlantic/images won;t help either, you;d have to use http://www.atlanticsite.com/images/link
(that's why I was confused about your folder structure.