In Lightning, Editors have always been able to choose a specific Image Style to use when embedding images in content with CKEditor, but it required quite a bit of setup by the site builder. Specifically, the site builder needed to create a view mode for each image style and then configure the view modes so that they would display the appropriate image style. Those view modes were then exposed as display plugins to Entity Embed. So the site builder then needed to configure the Media Browser embed button to allow those display plugins.
Once this was all done, editors would see a select list in the Entity Embed dialog that allowed them to choose which View Mode should be used for the embed:
In 2.1.6, Lightning introduced a new display plugin that allows editors to select an image style, alt text, and other settings each time you embed an image with CKEditor, rather that needing to rely on view modes.
When Lightning detects that an image is being embedded, it will automatically select this new display plugin (Media Image). The embed dialog, using the new display plugin, looks like this:
New installs of Lightning will also hide the "Diaplay as" select list and the manual update instructions for 2.1.6 suggest that existing sites do the same. We created an option to leave the existing behavior though for sites that have an established workflow that includes selecting view modes for embedded images.
See the 2.1.6 Release Notes for more information.