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They're thumbnails of other instance posts. I suggest migrating pictrs to the S3 for cheaper/easier storage.
S3 isn't always cheaper though... It's highly redundant storage (multiple copies in multiple data centers) so it's often going to cost more than a single copy on a single VPS or dedicated server or whatever. I guess in some cases it might end up cheaper compared to upgrading your storage to something larger though.
If you do want to migrate your images "to the cloud", Backblaze B2 should end up cheaper than S3.
For services like S3, it's included in the price.
Not sure where you got the idea that S3 would always be cheaper. $5/TB/month is a standard benchmark price for storage "in the cloud", and S3 is way more than that.
As an example, a Hetzner storage box is around $3.50/month (+ VAT if you're in Europe) for 1TB of space with unlimited traffic. The same amount of space with S3 is $23/month, plus the traffic.
For caches of media files, you don't need redundant storage like what S3 provides. You can save money by using a cheaper option.
I didn't say it was the cheapest, just that it's cheaper than S3. Cheapest would probably be a Kimsufi server or something similar.
This is for an SSD-based volume, which you really don't need for media storage. If you're using Hetzner, just get a storage box.