So, you'd like to dress up your post with an image?  It's a little complicated at the moment, but if you stay with me I know we can get through this!

First, you have to attach it.  To do that you're going to have to scroll down a bit past the editor window and find (and expand) this:

Now browse for your file.  You will note that there is all sorts of microprint in that File Attachments section dealing with what may be uploaded and so on.  It is safe to pretty much ignore that for the purposes of this tutorial.  You should keep in mind, however, that what you upload will not be altered when it arrives.  This means that if your digital camera produces obscenely large image files (and most of them do), your picture will likewise be absolutely enormous.  Therefore, it is important to get your images to the size you want them before you upload.

In many web browsers, simply clicking inside the browse text field will pop up your system's default file browser.  Simply locate the file you want to attach and click Open.  Then just click the attach button.

You should see something that closely resembles: 

After a few (or several, depending on file size) moments the upload dialog will disappear.

Your file is now attached and you have the option of attaching additional files.

The most important information now available to you is the small print below the name of each attached file in the Description column.

Here I have "/sites/default/files/account-edit-notify-verbosity_0.jpg" highlighted.  This is the relative URL we'll use to insert images in the editor above.  Copy this to your computer's clipboard if you don't want to have to remember it later.

Because the most likely reason for attaching a file to a node is to insert an image, feel free to skip directly to the Image section of the WYSIWYG editor guide that follows.