Click the little picture icon above the comment box, then paste in a URL of an image already hosted somewhere on the web. This URL must be a direct link to an image file, not to a page containing the image you want to embed. The URL must end in a valid image extension, e.g. .jpg, .gif, .png and so on. If you're using a service like Photobucket or the like to host your image, there's probably a button for you to click to get the link you need (I think it's called 'Direct' in Photobucket).
I can't even see your photo by clicking the link you've posted, which suggests perhaps the link is incorrect or the photo has been deleted (a blank page with the word 'Gone' on it is all I see).