Here's one possibility. The grid lines shown are, of course, only for use in the drafting stage where you are figuring out the coordinates needed to place the second image, box and arrow.
\documentclass[tikz,border=5pt]{standalone}
\usepackage{graphicx}
\begin{document}
\begin{tikzpicture}
% http://tex.stackexchange.com/a/9561/ - Caramdir
\node (img1) [anchor=south west, inner sep=0pt] at (0,0) {\includegraphics{example-image-a}};
\begin{scope} [x={(img1.south east)}, y={(img1.north west)}]
% http://tex.stackexchange.com/a/9562/ - jake
\draw [help lines, step=.1] (0,0) grid (1,1);
\foreach \x in {0,1,...,9} { \node [anchor=north] at (\x/10,0) {0.\x};}
\foreach \y in {0,1,...,9} { \node [anchor=east] at (0,\y/10) {0.\y};}
\draw [red, thick] (.7,.3) rectangle +(.1,.1);
\node (img2) [anchor=north west, inner sep=0pt] at (.9,.2) {\includegraphics{example-image-b}};
\draw [ultra thick, ->] (.8,.3) -- (img2.north west);
\end{scope}
\end{tikzpicture}
\end{document}

To place annotations on the overlaid image, you can use a variation on the same trick:
\begin{scope}[shift=(img2.south west), x={(img2.south east)}, y={(img2.north west)}]
\draw [help lines, step=.1] (0,0) grid (1,1);
\foreach \x in {0,1,...,9} {
\node [anchor=north] at (\x/10,0) {0.\x};
\node [anchor=east] at (0,\x/10) {0.\x};
}
\node at (.7,.8) [anchor=north west, fill=white, align=center] {Here is an\\annotation};
\end{scope}
Again, grid lines are just to help during construction.

Complete code:
\documentclass[tikz,border=5pt]{standalone}
\usepackage{graphicx}
\begin{document}
\begin{tikzpicture}
% http://tex.stackexchange.com/a/9561/ - Caramdir
\node (img1) [anchor=south west, inner sep=0pt] at (0,0) {\includegraphics{example-image-a}};
\begin{scope} [x={(img1.south east)}, y={(img1.north west)}]
% http://tex.stackexchange.com/a/9562/ - jake
\draw [help lines, step=.1] (0,0) grid (1,1);
\foreach \x in {0,1,...,9} { \node [anchor=north] at (\x/10,0) {0.\x};}
\foreach \y in {0,1,...,9} { \node [anchor=east] at (0,\y/10) {0.\y};}
\draw [red, thick] (.7,.3) rectangle +(.1,.1);
\node (img2) [anchor=north west, inner sep=0pt] at (.9,.2) {\includegraphics{example-image-b}};
\draw [ultra thick, ->] (.8,.3) -- (img2.north west);
\end{scope}
\begin{scope}[shift=(img2.south west), x={(img2.south east)}, y={(img2.north west)}]
\draw [help lines, step=.1] (0,0) grid (1,1);
\foreach \x in {0,1,...,9} {
\node [anchor=north] at (\x/10,0) {0.\x};
\node [anchor=east] at (0,\x/10) {0.\x};
}
\node at (.7,.8) [anchor=north west, fill=white, align=center] {Here is an\\annotation};
\end{scope}
\end{tikzpicture}
\end{document}
spyshould get the job done here. :-) – Paul Gessler Mar 11 '15 at 20:37