Click the button on the far left and insert an image link. It has to have .jpeg/.png/an image file extension at the end to work, though.
Also, if I recall, you can't upload images directly on here. They'll need to be uploaded to another server, like Photobucket or Imgur.
as for your avatar you can click on browse your computer, click on the image you want to use and click upload. With images it will have to be uploaded to a separate server like photobucket
I guess you've got all the help you needed, right? If not, let us know. In case you like a longer explanation, take a look at the header. There you'll find a thread called special features. It'll contains the topic 'uploading pics' as well. http://boards.theforce.net/threads/special-features-how-can-i-do-what-is.50010733/