get the direct image url (right click and copy image url i think) and then come here and click the little mountain picture icon (by the world/link icon and stuff) and put the url between img and /img
Remember you can use much bigger pictures if you upload them as attachments.
If you are hosting an image at a site like PhotoBucket of Flickr or whatever, they usually provide you the URL so you can just copy that.
While heartben is right about using the icon (which does look like the moon over a couple of mountains) I'm old school and just type most of my bbc codes, so, it's (without the spaces) [ img ] paste url here [ /img ].