It's bbCode based, so it uses IMG tags surrounding the link to the file, if you're using an external site. You use the brackets to surround the tags. If you do a quote of a person's post with an image, you'll see what it looks like. If I try to type it, it attempts to insert an image, so just do a quote on this, and you'll see the link to an imgur site image:
Do be careful of your images dpi settings and "size"...