PHPBB Software does not provide an option to "post" an image directly from a local computer. The only way to include an image is to link to an image already uploaded to the net.
The following is PHPBB's explanation:
Can I post Images?
Images can indeed be shown in your posts. However, there is no facility at present for uploading images directly to this board. Therefore you must link to an image stored on a publicly accessible web server, e.g.
http://www.some-unknown-place.net/my-picture.gif. You cannot link to pictures stored on your own PC (unless it is a publicly accessible server) nor to images stored behind authentication mechanisms such as Hotmail or Yahoo mailboxes, password-protected sites, etc. To display the image use either the BBCode [img] tag or appropriate HTML (if allowed).
Let us hope a browse, click and upload option will be included in a future PHPBB update.