What is the difference between display: inline and display: inline-block?

Question

What exactly is the difference between the inline and inline-block values of CSS display?

Answer 1

All answers above contribute important info on the original question. However, there is a generalization that seems wrong.

It is possible to set width and height to at least one inline element (that I can think of) – the element.

Both accepted answers here and on this duplicate state that this is not possible but this doesn’t seem like a valid general rule.

Example:

img {
  width: 200px;
  height: 200px;
  border: 1px solid red;
}

The img has display: inline, but its width and height were successfully set.