Click on the image logo in your tool bar (it appears after you click Reply).

If you want to display an image you found on the web, use
the Image URL box at the top.
A URL is the exact address of the image from a website.
So if you are at a website, right-click on the image to get View Image so you
can see its URL in the address line at the top of your browser. It will need
to end in .jpg, .gif, or .png. Copy and paste it into the Image URL line, add
some alternate text in case the image doesn't display or your colleague can't
see it (i.e. Statue of Liberty), and Click OK.

If you want to upload an image from your computer, use
the Browse and then Upload button at the bottom. That uploads the image into
Moodle and puts it in the list. Click on its link in the list and you'll see
the URL load above. Put in some alternate text that describes the image in
a word or two, and click OK.
