Padding added to height?

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Can anyone look at this page:
http://thesubtlemercy.com/newpathways/index.php/about/...

and tell me why, in the quote content block, (next to the images with the blue background), that giving that div tag a height of 200 pixels and a padding of 25 pixels, (so the text will not be flush up top), that the 25 pixels is added to the overall height rather than being inside the box?

To say it another way, the images are 200 pixels high. The blue background image behind the quote is 200 pixels high. I gave that block div tag a height of 200 pixels and a padding-top fo 25 pixels, and the result is that the padding seems to push the layout down 25 pixels so that the dotted line below it is pushed down? Padding is supposed to be included inside the box, (unless you are on IE6), right?

Any insight gratefully appreciated.

uswebdesigner
 
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uswebdesigner