When using a proxy, ftp requests are returned in the form of a web page. Some proxies use something like <img src="internal-gopher-menu" alt="[DIR] "> to bullet directories, and similarly for other file types. This dates from the first versions of Mosaic, which provided these. Gopher was common at the time, as it was the nearest thing to http that existed before then.
For a while, browsers followed suit, but now it seems to be disallowed, as we couldn't find any references to it on www.w3.org, and modern browsers don't seem to know about it.
However, it makes ftp sites look hideous through such a proxy, as the can't-load-image box is fairly big. This option therefore mimics the original behaviour. There may, however, be image types that this option doesn't cover. There are images for all the types we know of, but without the documentation, something may have been missed.
You can find the images used in the "images" directory beneath WebMask's directory. You can add more images by creating files whose names start "internal-gopher-" and putting them in this directory.