X-Face utility provides X-Face encoder/decoder for emacsen.
For GNU Emacs users: This package includes the x-face-e21 feature (x-face-e21.el). It provides displaying an X-Face image inline. Also, it supports the Face field which contains a base64 encoded PNG image. If you want to scale Face images, install the netpbm package.
For XEmacs users: Displaying an X-Face image inline is supported by the x-face-xmas feature (x-face-xmas.el). It is enabled by default.