Should point out that it's a little magnifying glass cursor, though, so I'm not 100% sure that we're on the same page, but that's the setting that controls whether a large image will load in full scale or fitted to the viewport.
As Kemistri says IE7 has an option (By Default, if I remember correctly) whereby a picture in a web page is automatically resized, BUT also, if you hover the cursor over the bottom right, a box appears which allows you to reset it. At the same time if you hover the cursor over top left there are several options available to you, including SAVE AS.
This appears to have been done away with and I can't see how to retrieve it (if at all.)
I don't get that bit either, so you're not alone. I remember seeing a small image toolbar in IE6, but I didn't know that it had vanished from IE7. I only ever use it for testing code and getting MS updates.