The image must be hosted elsewhere on the web, not uploaded from your computer. It may already be on a web page, in which case you right click on it and copy the address, or hosted on your own server, or perhaps an image-hosting site like Flickr or Imgur.
Wherever it is, when you get to the part of your post where you want an image inserted among the pearls of wisdom, you click on the image icon that is sixth from the left in the toolbar at the top of the post composition window (it looks like a mountain skyline with a sun in the sky). A dialog box pops up and you paste in the image address in the URL box. Ignore the rest of it for now and click 'OK'. Finish the words of wisdom, preview for spelling errors and then post. Done.