Bummer, I thought that might be the case, was hoping I was wrong!
There are ways to set up your PC as a home web server, in which case you could access files there from elsewhere on the web. But I don't know how to do that offhand, and it seems like a lot more trouble than simply uploading the photos to existing photo-sharing sites like Flickr or Photobucket, plus it prevents any security problems on your PC - as well as making the images available 24/7, whereas those hosted on your computer would not be available when it was shut down or offline.
Just a link. And you can't use HTML to make the picture show up directly. On the other hand, if you just paste the complete link it will automatically be made clickable.
I'm VERY glad we can't show pictures directly inside a forum post. It would look really busy, I'm sure. Especially with animated pictures.
I suppose you're right about it looking busy. But I VERY often see a picture on Facebook that I think my book loving friends here will appreciate. Yet I very rarely share them as someone commented before that they were wary of clicking links. Which is also understandable.