Image SEO is the practice of optimizing images so they're discoverable by search engines, accessible to all users, and don't hurt page performance. That covers descriptive file names, written alt text, appropriately compressed file sizes, and correct image formats.
Alt text specifically serves two purposes: it describes the image to screen readers for visitors with visual impairments, and it gives search engines context about what the image shows, since they can't "see" an image the way a person can.