You can't upload the images directly from your hard drive. Instead, you have to upload it somewhere else on the web and link to it. Signature is on the same page as where you change the avatar.
Sign up for an account on a photo sharing site (i.e. photobucket.com).
Upload your avatar.
Enter the address of the image (given by host site) in your profile.
To edit your profile, use the "My Home" link above.