Latex - Is it possible to have text on top of images?

Another solution is the textpos package which allows you to specify boxes at absolute positions on the page. The boxes can overlap, so you can put the figure in one box, and text in another box on top of it.

I usually do something like

\usepackage{tikz}
...
\begin{tikzpicture}
    \draw (0, 0) node[inner sep=0] {\includegraphics[width=4cm]{imagefile.png}};
    \draw (1, 1) node {Hello world};
\end{tikzpicture}

A very good toolset for manipulating images is pgf/TikZ pdf doc.

See \pgfimage for examples. It allows to mix text and image freely. There are many ways to do it. One of them is to use layers (p. 220 of pgfmanual). The pgf manual contains many simple examples, and is very precise.

Another solution is to use the lpic package: the homepage contains some examples.

You can find other examples for pfg and TikZ here and here for many impressive examples.