How do I embed a pic?

If I have an image I want to display in a post, how do I do it? I know I will slap my head in disgust when you tell me, but for my life, I can't figure it out.

Does it actually upload and store an image, or does it refer to one on the web? Is there a diff between these two methods?

TIA.

Stuart

 

test



work?

 

how about this way?