Copilot has been able to create images for its entire existence. But it used to have even more functionality. You could change the style or replace an object.
The main image generator is Image Creator. There the limit is about 500 images per day. Copilot and Image Creator use an old version of DALL-E. They generate images for free.
In November, Microsoft moved them all to a model that uses GPT. But thanks to the community, they were forced to drop that version and go back to the old one.
Another generator Microsoft Designer has recently appeared. It was originally a promising project. But recent restrictions have killed all the potential. 15 requests per month for free and 60 with subscription.