If the image is already online, you would go to the upper right corner, where your username is displayed, and click "My Settings." Go to the "Profile" tab, and then select the "Change Signature" option on the left side. In the space where it says "Edit Signature," click the "Insert Image" button (it looks like a tiny picture of a tree). Paste the URL to your image in the window that pops up, and click the button to close the window. Your URL will then appear in the "Edit Signature" area between [img] tags. When you click the "Save Changes" button, your image should appear embedded in your signature.
If you're not sure if your picture is the correct size to be a banner, please read the Banner Rules in the first post of this thread, and adjust your image to a good size before you add it to your signature. Your image has to be hosted online for it to work. That's it!