There are several different ways to accomplish what you want. If you're looking to embed your pictures
like so, then it's different from adding an attachment.
If you want to upload directly from your PC, go to User CP (top left) and click on "Pictures & Albums" under the "Networking" section on the left. Start an album, upload a picture, viola. It'll give you both the BBCode version and the Picture URL version. Use the BBCode version and just inject it into the thread where you want it. You don't need to click on the image button.
The Picture URL version is more for when you want to link somewhere that's not a forum. I would advise against this as it uses polyamory.com's bandwidth for every hit and they can't control traffic outside of their own forum but they can break links/delete pictures that are eating too much bandwidth.
Alternatively, you can use a site like photobucket or imageshack and host your pictures there. They are dedicated to picture storage and generally allow much higher resolution images. You can link from them by obtaining their BBCode (they'll provide it for you, just gotta copy the right one) or by using the image button and giving the direct link.
Either way you choose, be mindful of what you're doing. The picture I used is pretty obtrusive. For people with lower resolutions you may break the layout of the website which is extremely frustrating. I use a TV for my monitor (1080p, yay!), so it doesn't affect me, but someone with 1024x768 resolution (common in the US) may have to side-scroll just to read text because of a picture you link.
Source: 10 years forum administrator, 2 years as a global forum moderator for an independent gaming company
Photo: Sample image from Windows 7. Fair use applies.