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When using an Image component in Unity, the imported image must be set as a Sprite. This is because the Image component specifically requires a Sprite type to properly display 2D graphical elements within the UI. A Sprite is a 2D graphic object that can be manipulated, animated, and consists of image data that is optimized for performance in a game.

Importing images as Sprites allows you to take advantage of Unity's built-in features such as spritesheets, which enable packing multiple images into a single texture for reduced draw calls and improved performance. The settings for the image import must be configured accordingly in the Inspector window, where you can change the Texture Type to "Sprite (2D and UI)" to enable this functionality.

Other image types like Texture, Image, and Photo do not provide the same level of usability for UI elements since they are tailored for different purposes. For instance, a Texture can be used for 3D objects or environments but does not have the same properties that Sprites do for UI elements. A straightforward understanding of these distinctions is crucial for efficiently managing image assets in Unity projects.