If you want a picture to show up, just upload it to a place like Snapfish. Then you'd use the URL of the picture in the code to insert it into your signature (under Edit Profile in the User CP).
Signature images should be no larger than 250 pixels wide. Also, the total height of a signature (including text) should not exceed 200 pixels. To see the dimensions of a picture, right-click on it and select "Properties". :)