You need to use the Full Editor. Then under the area where you type in your post, you'll find an "Add Attachment" tab. Click that, Then click "Browse" and find your image on your computer and after that click "Upload File". Once the image is uploaded you can just save your post, or if you prefer (and this is a nicer way to do it), click in your post where you'd like the image to be placed (between paragraphs for example) and then click "Place In-line". This will insert some code to display your image at that place in your post. Then save your post and the image will be included.