Hi there, When you are writing a post, click the "Add image" (looks like a square within a square) button right next to the "Add media:" text. A box will come up with the option to upload directly from your computer OR paste in the URL to an existing image. I have had a few issues with uploading so I generally just upload to imageshack first and paste in the URL that it spits out there.
Generally this happens because you need to CHMOD the wp_content folder to 777. Than everything goes soothly.
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try to upload you picture somewhere else and try to paste your link in your blog to show picture if you are finding any sort of problem i directly inserting image to wordpress blog
Try chmod 777 to the wp_content folder. You can doit with any FTP client or, sometimes, through your hosting control panel. Good Luck