We will support image hosting again, it's on my list of things to hack. In the meantime, as SH says, you need to upload to a free image host somewhere. ImageShack
has been a popular choice in the past. I think google sites works too, and there are others. Then paste the image URL in here.
A few years ago, most ISPs offered some free webspace to all subscribers. It was easy to upload an image for forum use.