Very simply, uses JavaScript to remove broken images from page display.

room34

This is an extremely simple plugin that uses jQuery to remove broken images from displaying on your pages.
Note that version 1 does not alter any content in the database, nor does it remove the image tags from the initial HTML output of the page, so it doesn’t stop 404 errors, nor does it benefit SEO or PageSpeed scores. It does, however, prevent the dreaded “broken image” icon from appearing in your pages, and in most cases it will remove the blank space some browsers allocate for images as they are loading.
Coming in version 2: We’ll be adding an admin tool to let you see a list of posts and pages containing broken images, along with a tool to automatically remove their <code>img</code> tags from the database.

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