Yes, it's allowed (so long as the pic you're posting is not offensive, of course). This the layout when you are in the process of doing it:
[img]imageaddress[/img]
Using my avatar's address (URL, if you like), I can reproduce its image here:

Right-click on the image, and you get a selection that includes "Copy image address (or URL)". Click on that, and paste it (I use ctrl-V) to your text field, and the [img]/[/img] bits go on each end, respectively. If you click the quote button on this post, you can see what it looks like in the raw.
Hope that's clear. Give it a try using my avatar, and see how it goes.
This is the method I use, anyway.