You can not directly upload for use in posts. You can, as described above, use an outside image host or your own server and then link to them in posts.
You also can create an album and upload up to 60 images. Once you have the images in the album you can link to them in a post.
To do that:
1. go into your userCP.
2. Under networking click on "pictures and albums".
3. Create an album.
4. Upload images to the album.
5. Go into the album.
6. click on the image you want to link to.
7. At the bottom copy the BB Code for the image tag.
8. In your post paste the copied BB Code.
9. Go smoke a joint to celebrate.
Here is how it comes out:
.