Below the box you type in is an option to upload attachment, when you select that you will get a pop up box which you can then navigate to where you have the picture saved. Open the picture & select attach file, once you have done that you will get the option to place it inline. i.e. inside the box you type in
There are suggestions on what size to make the pictures before upload as there is a limit but can't remember what they are, search on the forum should give you the required info.