Yes. But he didn't exactly invent that.

The replication of images was already used in late 14th century in Europe in the form of woodcuts for prints that only consisted of a single page, such as pamphlets or hand bills. Text and a picture were cut into the same block of wood and sometimes metall. A frequent use were so called "Pestblätter", which featured a picture of a saint that was considered to help with the plague along with prayers or warning advice.

They also proceeded to print books like that throughout 15th century, but it was a really intricate technique because cutting all those little letters into the blocks was difficult and also, you had to have a block of wood for every double sided page. (So called "block books" or "incunables") Consequently these books sometimes even had more pictures than text. Sometimes they'd only print pictures and write the text on the pages by hand.

Fast forward to Gutenberg, placing a woodcut or a metallcut on the layouting board together with letters was not a problem as long as it had the same height as the letters and text could be arranged around it. It also made a nice filler for empty space or border to keep the text in line. In expensive prints the pictures could be added afterwards and/or were coloured by hand, especially when engraving was used instead of cuts (because it requires to wipe off excess ink, since it's not a relief printing technique as the printing press but an intaglio technique, where the ink is held in the lower parts of the plate and not applied on the upper ones.)

The bavarian library holds a huge collection of digitalized incunables and early prints. I hope it's internationally accessible, but you can for example find an illustrated print from 1517 (pictures look like woodcut to me), here: http://daten.digitale-sammlungen.de/bsb00003225/image_3 (you can browse trough the pages)

As for sources, I learned all of this at my introduction into book studies when I started a master's degree for renaissance and medieval studies (did not go through with that one, though). So my sources would be in German. You probably can find information on this in any english spoken introduction into book studies, too, though.