First you need to host the picture at a hosting location. I prefer photobucket.com, but there are endless choices.
Copy the direct link for the hosted pic. It will look something like this - http://i712.photobucket.com/albums/ww123/vhinch/LesBaerTRS004.jpg
Use either the insert image icon in the toolbar above the text box, or just type out the image tags, which is what I usually do.
It should look like this when you type it-
[img]http://i712.photobucket.com/albums/ww123/vhinch/LesBaerTRS004.jpg[/img]
Which will show this result-