I explained it back here for skoob at some point recently
You can add pics from your HDD by using the 'Upload a file' button in the bottom left there next to 'Post reply'. You can then browse your files to find the right one. You will be prompted to hsow just the thumbnail or the full image. Full image is the one you're after.
To hotlink to the image you use the blue little picture-ie type button just up there lext to the chain 'links'. You'll be prompted to enter the URL specifcally for the image, and will finish with a .jpg, .png or .gif. For this, you can use an image that you have uploaded to the image hoster of your choice (I use imgur, it's super radpants), or just find the image that you want somewhere on the internet. I do both, and if there is sometheme of image or gif that i haven't already uploaded to imgur (less and less likely these days), a simple google image search can find what I'm after clicking the 'view image by itself' (or whatever it is). From here, copying the picture URL and pasting it into the dialogue box that pops up when you click the blue button is all you need to do. If you are using Firefox (and I think Chrome), you can also just right click any image on any site, select (copy image URL) and paste it into said dialogue box.
Not that I know much about this sort of thing.