Here is how...
First you need to sign up for an image storing account. Flickr or Photobucket.
If its a photo that you found on another site, you can also hotlink it by finding the address of that image. Firefox makes it real easy by right clicking on the image and selecting "Copy Image Location" but you can do it with other browsers too.
Open a new post and when it comes time to insert the image, click the http://forum.501tag.com/style_images/TAG40/folder_editor_images/rte-image-button.png button and in the pop up box, paste the images address into the address bar.
You can also insert the image by typing this
[img]http://forum.501tag.com/style_images/TAG40/folder_editor_images/rte-image-button.png[/img]
That's pretty much all there is to it, if there are any questions, please feel free to ask.

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