Aside: Although iTerm2 (on macOS) doesn't appear to work with this, iTerm2 actually supports full-color inline images, and has an "imgls" script which does something similar. (There's also "imgcat".) https://www.iterm2.com/documentation-images.html
This is because iTerm2 doesn't support sixels (which is part of a VT standard I believe), and instead has its own custom version of the same thing.
I find iTerm's approach is more simple yet more powerful: better compression, thus faster; no dithering, thus better image quality; it's even have GIF support. Sixel is an 30 year protocol designed for matrix printers, i'm not sure why we should stick to it. I think terminal emulators should adopt iTerm escape sequence rather than Sixel.
Aside of iTerm, image inlining is supported in Terminology[2]. Not sure about compatability with iTerm however.