The forum itself is not allowed to host/store picture files, mainly because this would degrade the perfomance of the forum and cause file storage issues for the hosting service.
You can create a free account on a picture website like Photobucket.com and upload your pics there. I use Photobucket for mine. I believe you get up to 500 MB of storage with a free account. Any picture hosting service that allows you to cut and paste a direct link to the file will work.
The bulletin board code requires an envelope of [img][/img] around a picture's Internet path for it to be displayed. The pics have to be linked to an Internet hosting service instead of a folder on your PC. The code can be either upper or lower case.
Once the pic is uploaded, you can move your mouse over it and several text boxes with pop up.
The easiest one is IMG Code because it already has the [img][/img] already inserted around the path to the pic. It's code can be directly copied into message text for the picture to be displayed.
Another box is named Direct Link. This one just has the path to the picture. This is used with the Insert Image button on the New Message editing screen here on the forum. The Insert Image box automatically puts the [img][/img] envelope around the pic for you.
If the path for either the Direct Link or IMG Code boxes doesn't copy automatically when you click in the box, you can hit Ctrl+C on the keyboard to copy the text and then Ctrl+V to paste it into either the message text or the Insert Image dialog box.
You can hit the Preview button to test things out.
I also resize my pics to 800x600 or smaller so members with lower resolution monitors can see the whole pic without having to scroll left and right all the time. The smaller resolution also reduces the time it takes the pics to load up and become visible on the thread. I also use a photo-editing program named ACDSee that came with my HP printer and scanner to save the files to JPGs. Microsoft Office Picture Manager works for me as well because it's on my work laptop.
Photobucket, like most picture-hosting sites also has its own editing tools that allow you to do this as well.
I have recently noticed that Photobucket removed the "Save and return to album feature" after the upload is finished. If you don't want to share the pics, just click the My Home link at the top of the Photobucket page and you can view your pics.
Hope this helps and Happy Posting!