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When you type your message in the white box in "New Reply" there are several options (Bold, Italic, Underline, etc.). Just below them are two options for inserting images. "http://" and "IMG". If you use "http://" you create a link to the site where the image is. If you use "IMG" you will create an image that will appear in your post. Regardless of which one you choose, your image must be on a site that can be downloaded from.
You'd normally put the image in the post if it's small enough not to be a problem for people with low speed connections, and use a link if it's large.
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