Icon and Images can both accept a Vector or BitMap as illustrated below.

Image

Icon

The only difference that I can point to is that Icons use tint to modify the content.

Icon is part of Material design. So it has default size of 24.dp, as defined by Material guidelines, and should be used for displaying icons of this size. It'll use LocalContentColor value for image tint, and you can change it manually with tint parameter.

Most common usage is using it with predefined material icons, like this:

Icon(
    Icons.Default.Hub,
    contentDescription = "...",
    tint = Color.Black
)

But you can create your own icons in code too, check out source code of any default icon for the reference. You can also use it for displaying a resource icon or drawable, they're gonna be scaled to fit.

Image is a Compose container for displaying images of any kind. It's much more flexible, like you can set contentScale, colorFilter, and alignment.