For simplicity lets say that I have a web page that needs to display thumbnails of images. The images locations are stored in a database(the images are stored on Amazon S3).
Yes.
You make a ASP.Net page that does Response.Clear(), sets Content-Type-header in Response and sends the binary data of the image (also through Response). The image can be resized on-the-fly, but I'd recommend caching it for some time on disk or so. Then you reference the image from HTML as . For storing image in memory before sending you can use MemStream.
I have sample code but not in front of me right now, sorry. :)