Yep, you just click on "Manage Attachments", click the "Browse" button, choose the photos you want, and click 'Upload'. Very simple.
You can use an external hosting site like Photobucket also, just use the IMG tags to make them show on the forum.
It's always better to upload directly to the forum, because 1, it's easier, and 2, they'll be here virtually forever. A lot of people use a site like Photobucket and forget about it years later, or delete it, and all the pics you posted on the forum will just be red X's. Sucks for others if they were looking forward to seeing a specific picture that was posted, and now it doesn't work.