Display Category with image

{{block type="catalog/navigation" name="catalog.category" template="catalog/category/list_category.phtml"}}

And also you need to create a list.phtml file under 

“/app/design/frontend/default/default/template/catalog/category/list_category.phtml”

and add the below given code to it: 

 foreach ($this->getStoreCategories() as $_category): ?>


 $open = $this->isCategoryActive($_category); ?>





$cur_category=Mage::getModel('catalog/category')->load($_category->getId());


$layer = Mage::getSingleton('catalog/layer');


$layer->setCurrentCategory($cur_category);


if ($immagine = $this->getCurrentCategory()->getImageUrl()):


?> 













 echo $this->getCategoryUrl($_category)?>">


 echo $immagine ?>" alt=" echo $this->htmlEscape($this->getCurrentCategory()->getName()) ?>" width="135" height="135" />


 echo $_category->getName()?>

endif; ?>

endforeach; ?>