Answer 1

It's just text that will be displayed instead of the image if:

a) the image can't be loaded/found for any reason
b) the browser is text-based or possibly a screen reader. blind or otherwise visually impaired people use these for example.

therefore you should always specify it if the image represents content, i.e. conveys a message. this is mostly important when the image contains text, since a common screen reader will simply read text on the website, not in images.

for backgrounds or otherwise purely layout/design-related images, you can omit it or simply specify alt="".

alt is NOT the same as title, which displays a tooltip on mouse-over.