You are allowed 8 lines of text or BB code total.
In the User CP go to edit signature and upload a pic (it can only be a max of 500x150 or 58,5KB which ever is smaller. Now that it is uploaded you will see a small pic of it (still in the CP) and to the right of it you will see a link that says Insert Signature Picture, just click on that then click the save signature button and there you have it.
Also as a tip, if you want people to see some words when they point at your sig (put their mouse cursor over your sig) here is how you can do it. After completing the steps above to get your sig pic showing. Go back into CP and the sig section and look at your sig. You will see this.
Now just type whatever you want in between the brackets and when someone points at your sig they will see what you typed.
Remember only 8 lines of BB code or text total.