Here are two tutorials I recommend:
Posting Image or Photo On Forums n Message Boards
An eBay Tutorial on Images and HTML
(If you really need help with basic HTML, check out the HMTL cheat sheet from Webmonkey.)
There are several free image hosting services, but even if you're using standard blogging software hosted with the company (i.e. at Wordpress or Blogger) you have the means to host your own photos. You can use the blogging software to upload the images even for your sidebar.
For those of you who use Blogger, here's my 'cheat':
1) You'll need to right-click and save the image to your pc
2) Act like you're going to make a new blog post
3) Use the 'compose' window to upload the image from your pc
4) Use the 'compose' window to make a link
5) Click the 'edit html' tab
6) Copy all the code
7) Save the post as a draft (you can title it "image file" or something simple, and I'll explain more in a minute)
8) Paste the copied code into your template sidebar.
By saving this as a draft, you can be sure the image is saved at blogger ~ and, you can use this same draft/post for future needs. (Other images, banners etc for your sidebar.)
I'm guessing there would be similar means in other blogging programs.
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