I have been trying to place image within the post. But the problem is I could not place it in way that text wrap around the image rather it appears in between the Text lines. Do I need to use some plugin or I'm just not following the right way?
What theme are you using? Generally a correctly written theme will handle wrapping text correctly. Try switching to one of the default themes from WordPress.org, TwentyEleven or newer.
By default, images appear as if they were a paragraph. To get text wraparound, click the image, click edit (the pencil icon) and choose left or right alignment. You might also want to add a bit of horizontal/vertical border, which creates white space around the image.
To add to this... I always center align images and it fits in properly between two lines. You just need to play around with enter mark and alignment tools.