Or use the IMG tag to link to a photo hosted elsewhere. When you're editing a message, look for the toolbar icon which shows a mountain against a yellow background. Click on it and then give it the url of your image. There is no limit on image size when you use this method.

You can get free photo hosting at photobucket.com. Or just google for "photo hosting" and you'll find a ton or sites which also host for free. Photobucket is very easy. It automatically creates the URL and HTML that you may need to put a photo in your website, an ebay listing, etc... Of course, they'll want to entice you to upgrade to the paid pro version, but you'll never need that just to put pics here.