Question about inserting images into threads

[Hal 2007]

Is there a way to insert an image into a thread that is located on your local C: drive,
either by using the [img]path-filename[/img] method or just by picking the [Insert Image] icon button in the text editor?

I know I can upload an image to a folder on my website and refer to it by using this method. I can also attach an image file to my post and the user can see it as a thumbnail and open it to enlarge it. But I've also seen where people insert images into their threads. Are they uploading them to a website location first?

It seems that if you attach an image to your post, that you could use the method to locate where the image file is located on a forum.

Thanks for your tips on this.