Image Packer is a tool for packing multiple images into a single, large image. This is useful for generating sprite sheets. The tool also generates an xml file that lists all the frames in the sprite sheet with their coordinates and sizes. A game would then load this xml file to parse out individual sprites in the sheet.
Image packer can tight pack images or automatically scale the texture up to a power of 2, which is generally required for OpenGL and DirectX based games.