All pictures must be hosted by a third party site. Here is a short list of some of the more popular sites for photo sharing.
Picasa - http://picasa.google.com/
Photobucket - http://photobucket.com/
Snapfish - http://www.snapfish.com/
Smugmug - http://www.smugmug.com/
Shutterfly - http://www.shutterfly.com/
flickr - http://www.flickr.com/
PictureTrail - http://www.picturetrail.com
Pictures in posts - Once your picture is uploaded to the photo sharing site, copy the IMG Code and paste into your post. If the link already includes [img] before and [/img] after the URL, then paste it directly into your post. If it doesn't, use thebutton and paste the URL into the dialog box.
Avatars- If you are selecting a picture for your avatar, for best results, it should be 48 x 48 in size. Most photo sharing sites give you the option to resize your pictures to an avatar size. Enter the Direct Link (URL) and paste into the spot to Enter Avatar URL. Save changes.
Flickr instructions (as of Jan 2011):
1. Click on your photo in Flickr to open it.
2. Click on the small arrow next to SHARE THIS - top left of the photo.
3. Select "Grab the HTML/BBCode"
4. Select BBCode (not HTML, which is default)
5. Select the size of photo you want from the drop down box, eg. small, thumbnail
6. Copy the code that appears in the box. Make sure you have caught all of it!
7. Paste this code directly into your forum post - do not use the Image (mountain) button for this.