Click on the little picture frame on the formatting bar
You then have a choice of inserting a picture stored somewhere on your system by dragging and dropping it into the rectangle or clicking as
invited when you will get a file structure to navigate and select the picture you want.
Alternatively you can click on the chain in the dropdown
enter the web address of a picture on the internet and click insert.
In the case of a picture stored on your system you can also click on 'attach files' at the bottom of the screen
when you will again be able to navigate to the required picture.
You will then get an option to insert as either a full size image or a thumbnail.
Note that in all cases the image is inserted at the cursor.