You have to upload your picture files to a web server. Then copy the URL that points to it to the "Image URL" box just about the text box where you type your message. Its as simple as that.
Most internet accounts have some server space available for your use. If so, use that. Some of the cheap ISP's like Netzero or Juno might not give you any server space to use. In that case, there are picture hosting sites out there you can use. I don't use those so I can't give you any information on them, but others can. But use the server space that your ISP provides if they provide it, since you are already paying for it, you might as well use it.