Which service should be used for automating the creation and distribution of a custom Azure virtual machine image?

Using Azure VM Image Builder is the appropriate choice for automating the creation and distribution of custom Azure virtual machine images. This service allows users to define the image creation process through a YAML-based template, specifying the base image, the necessary packages, and configurations needed to build a custom image. It simplifies the process of creating images by providing a declarative approach, ensuring that the specified configurations are consistently applied. Moreover, Azure VM Image Builder integrates seamlessly with Azure DevOps and CI/CD workflows, facilitating the continuous updates and modifications of VM images in a streamlined manner.

On the other hand, other options serve different purposes. For instance, Azure Compute Gallery is primarily used for managing and sharing VM images across subscriptions, but it does not automate the creation of images. Virtual Machine Extensions are small applications that provide management and configuration functions for VMs but do not play a role in creating custom images. Virtual Machine Scale Sets are designed for deploying and managing a group of identical VMs to handle resource scaling but do not involve the creation of custom images per se. Hence, Azure VM Image Builder is the most suitable service for automating the entire process of image creation and distribution.