You upload to a site like Majhost, Photobucket, ImageShack, or Tinypic, then you get the url to the picture and put int between image tags("

").
For example this:
[img]http://forum.blockland.us/Themes/Blockland/images/smflogo.gif[/img]
Would display as this

Or do you mean uploading to a picture in your post to do that just go to additional options and attach a file.