The law states: "a person shall not store or gain access to information stored, in the terminal equipment of a subscriber or user unless the requirements of paragraph (2) are met."

Paragraph 2 then sets out how consent needs to be obtained, and the test that the subscriber needs to have given their consent before information is stored on their computer.

Cookies, flash cookies, HTML5 databases, etc. are all covered under the general concept of storing on a subscriber's computer.

The original law is here - http://www.legislation.gov.uk/uksi/2003/2426/regulation/6/ma... - and here are the recent amendments - http://www.legislation.gov.uk/uksi/2011/1208/made

Isn't this vague enough that a site with an image is infringing?

"Sure, they requested the web site, but they never explicitly said they wanted the image, and now you've gone and stored it in their cache."

How do you read back the tracking information from a cached object, page or image without replacing it with a fresh new one?

No, from my reading of the guidelines I took that any form of persistent browser storage falls under them.

I'm not a lawyer though, just a British web developer who has had to comply with this law.

I don't know the exact law, but the law might not refer to cookies explicitly, but instead refer to tracking users. Switching from one tracking type to another will not avoid the law then.