I recommend using something like photobucket to upload & store your pictures.
That way you have access to your own pictures from anywhere, you have more upload space & it helps with the management of space for this site as we don't end up with massive picture folders.
Follow photobuckets instrutions on how to register & upload to them.
You have a few options on how to display your pictures, one way is to simply copy the IMG link & paste it into your post on here where you want the picture to display.
To upload pictures on here is now a little different to when Tony described it due to new software.
When you compose a message on here you will see a + Additional Options that if you open up will give you the upload options.
Allowed file types: doc, gif, jpg, mpg, pdf, png, txt, zip
Maximum attachment size allowed: 1024 KB, pics per post: 25
Simply make sure your picture is an allowed type & below 1024kb, then browse to find it, upload it & save.