The "No Image" gif will show, ONLY if there is no reference in the database to a pic.

So, lets say product ABC has an image abc.jpg ... but after adding the product and the image, you decide that abc.jpg is awful and you delete it from the server.

The reference to abc.jpg STILL EXISTS in the database, so the php will assemble the <img src> using that reference. as the image itself no longer exists on the server (in the images folder), it displays the alt text.

Either the database field MUST be empty (null), OR you should deliberately state that the image is no_image.gif by associating that image with the product data.