If you press the "insert image" button, you get [img][/img]. You then have to paste the URL for the image in the middle, like this:
[img]http://ouchtoo.org/badge.gif[/img]
and you'll get the image after pressing "post" or "preview":
Warning: if you use the "insert image" button, you have to keep an eye on the size of your image - if it's too big, it'll fall off the side of the thread. To keep it under control, use a "width" directive like this:
[img width=100]http://ouchtoo.org/badge.gif[/img]
and it'll resize:
The width is specified in pixels; I recommend 300 pixels for any image wider than that, so that it will match the attachment thumbnails. You can then be sure that threads will render properly on as many screen sizes as possible. If the image is less than 300 pixels wide, you can leave the width directive out and you'll be fine.