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There is no such thing as the 'alt tag' in HTML. There is, however, the alt attribute which is applied to the image tag.
The alt attribute is designed to provide alternative text for an image. I've seen it create wars within marketing departments.
Let's look at the possible sides in the alt attribute wars.
SEO Camp #1: The alt attribute impacts on your search engine position. You should use keyword rich alt attributes.
SEO Camp #2: The alt attribute does nothing for your search engine position. We can give you no SEO business case to spend time and money on them.
Accessibility Camp #1: The alt attributes are required and can be relatively brief.
Accessibility Camp #2: The alt attributes are required and need to be appropriately evocative paragraphs.
IT Camp #1: It will take weeks to add and populate thousands of alt attributes! Weeks! Maybe longer!
IT Camp #2: We could... mabye... use something dynamic... populate... automatically... with just a little work. Maybe? Perhaps?
Marketing Camp: Just tell me what the best practise is!
Although some of the latest technology looks very impressive it is safe enough to say that search engines can't read well enough to use them in any significant way in the ranking algorithms. Google's guidelines still say; "Try to use text instead of images to display important names, content, or links. The Google crawler doesn't recognize text contained in images."
Sometimes, of course, you have to use images. You would struggle to sell shoes online if you couldn't have pictures of shoes on your website, after all. When you find yourself using images you should also be making use of the alt attribute. Accessibility people agree.
The impact the alt attribute has on Search is variable. If you're trying to optimise for image search then the alt attribute (along with the file name) is important. It is worth remembering that the main search engines are including images in their Universal or Blended results. You can steal the number #1 position with a successful image SEO campaign.
The text in an alt attribute, the alternative description of an image, carries significantly less weight than normal text on a page. If the only place on your webpage you mention [keyphrase #580] is an alt attribute and your two competitors both mention [keyphrase #580] in their body content then you will be outranked by them both. In fact, a good rule of thumb is that you only really benefit if your alt attributes repeat words already mentioned in the body text.
There are exceptions to every rule of thumb, though, and an easy one to point out would be those rare occasions when there is nothing but images on a webpage as in those scenarios the alt attributes carry far more weight than normal.
So, from a search point of view is it worth making use of the alt attribute? Yes. Every little helps, especially in competitive marketplaces. In some cases the correct use of alt attributes will be enough to push the quality signals your site gives off to Google and the other engines up to the next level. When that happens you'll see dramatic improvements in your search positions.
I think it is also important to remember that although alt attributes may not always be worth splashing the cash from a Search point of view there are compelling legal arguments in ensuring your site is appropriately accessible.
Okay, so there seems to be reasons why alt attributes are worth bothering with but what about the size debate? How large should an alt attribute be?
The alt attribute does not need to be an essay and nor should it be. The alt attribute can and should be relatively short. It is true to say that I have heard some arguments to the contrary from some corners of the accessibility and usability discipline but the majority of practitioners prefer accurate and relatively terse sentences.
A rule of thumb here is the user experience; what does the page look like in a text browser like Lynx or Google's all-text cache? Have you interrupted the flow of the page by slapping in overly large alternative paragraphs? If the answer is yes then you've gone too far and helping neither your SEO nor your accessibility.
The best way to cope with alt attributes is from day #0. If you're putting a new website together then remember the humble alt attribute. In fact, make sure your CMS system encourages alt attribute use. Are there fields for alt attribute content in your CMS? Can you complete an image upload without writing an alt attribute? On many occasions you can fully automate the alt attribute.
Most retail sites, for example, can safely use the name of the product as the alt attribute for the picture of the product. If a webpage is trying to sell a CD of Goldfrapp's Supernature then the alt attribute for the image of the CD cover could easily be "CD cover: Goldfrapp - Supernature". Oh look. You got plenty of keywords in there too.
Should an alt attribute battle begin to breakout across the company I've found the best way to settle things is to get everyone around a table and to talk it through. You can't push a website beyond its programming and you do have certain legal responsibly. The next stage in the discussion is to mock up how a webpage would read with new alt attributes. Use your browser to disable images and stylesheets (someone in IT can do this for you) and print it off. By reading from top to bottom you're reading what many search engines and accessibility software will read. Substitute in different drafts of alt attributes and decide on which gives the best user experience.
Battle over. Phew.