There are two basic ways to display your .jpg or .gif image. The first way is to embed a relatively large image directly into the post ("embedded image"). The second way is to include a smaller "thumbnail" image, and when clicked it creates a pop-up window with the larger version of the image ("pop-up image").
If your image is big, like a photo from a digital camera, you'll need to resize it using your graphics editing program. Depending on the template for your website, the image that you create for your blog post should generally be no wider than 450 pixels at 72 dpi. This will work well for both embedded images and pop-up images.