I've always used
imgur.com for hosting. It's free, easy to use and you can do gifs and videos as well.
Here is the link to
"How To Insert Pictures To Threads" it's in the
Administration > Announcements section. Basically follow the steps outlined by Steve, but use something else (e.g. imgur) instead of photobucket as they now charge £££ and have renewals, meaning loads of pics on forums like this one, tsxclub, acurazine and heaps of others are now broken.