There are two basic methods.
1. Click on the Insert Image Icon. Then insert the URL from your image hosting service. You must have first uploaded your image to a image hosting service. Do a Google search to select an image hosting service.
2. You can use the attachments feature for this - just see the 'additional options' for the main post window. This will allow you to select an image from your computer. It will not show in the preview. It will be uploaded after you save your post.
3. Free Image Hosting Service: free image hosting (http://www.postimage.org/)