I use a lot of images in my wordpress and due to hosting restrictions I need to host the images somewhere else and hotlink them in my blog posts. So I am looking for some reliable image host which provides free hotlinking service. The Google Picasa would be best, but I think they do not allow hotlinking. PS. I'm not looking for hosts like tinypic or imgshack, I'm looking for some websites which provides powerful features to oranize images (eg. albums etc).
You will be hard pushed to find a site that does all that for free. However, imgur.com allows dead simple free image hosting with no discernible limits. There is a feature to group images into albums, but that is mainly for display on imgur itself and not your own organisation.
Your other alternative is a CDN solution like Amazon S3/Cloudfront. Unless your site is very popular (thousands of visitors a day) then it will be very cheap.
Plenty of people run their blog images off of Flickr, including slideshows. There are a couple of minor requirements, like the images linking back to Flickr, but if you want someone else to handle your media, especially if you're asking for free, you have to make some concessions. (In my experience, this isn't even always done and you'd probably have to be a major offender or reported to even get noticed.)