This 'image' was the topic of a discussion a while back. May I add an expert opinion.
The woman who appears on Michael's jacket is Mama Corleone, who is sat next to Michael at the funeral. The reason she appears is simply because two reels of film have been joined together at that point, and sections of frame have overlapped. This happens whenever reels are joined, and the editing team will remove it. Looks like this is one that slipped through the net. Can you blame them? It's hard to spot, even when you are looking at it!