Inline Image in Formula Field Using image from Static Resource.

if( Is_Priority__c, IMAGE("resource/images/RedFlag.png", "New", 50, 30),IMAGE("resource/images/GreyFlag.png", "New", 50, 30))

IMAGE("resource/images/RedFlag.png", "New", 50, 30)

             IMAGE(<URL Of the Image >, ' Alt Name of Images', Height, Width )

resource/images/RedFlag.png 

             URL of the Static Resource. 

Happy Coding