This is the text that wraps around the floated image. You usually want to add a small right and bottom margin to the image so that the text does not touch it. Once the text passes the bottom of the image it returns to its normal state and flows full width across its parent element. The text border is dispayed red here to show that only the text reflows. The element box behaves as if the image is not there at all.
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A code example from Stylin’ with CSS, Third Edition by Charles Wyke-Smith. Visit stylinwithcss.com for more CSS information and updates.