For me it's the 5th button above the typing field for a reply/comment (bold/italic/link/emoji/"upload image"). There is also the syntax format you can manually do which you can find in the formatting help link. an ! with [] then (url) no spaces (hard to show without the format wanting to change it).

edit: I believe the proper use of "upload image" is if you want to share an image from your device which it uploads onto the lemmy server space, using the url to link to another website also works but there is always the problem of size/format of the image and if that link becomes broken your image won't show.