You need a URL that will point to it. The pic has to be somewhere on the web. It also has to be somewhere that it can be directly accessed (without having to enter someone's account, such as on a photo album type site) and not on a service that won't allow outside linking. :)
Did you put a URL in the "Image URL" box below?
Also, hit the "preview message" button to see if the pic shows up. If it doesn't show up on the preview, none of the rest of us will see it. ;-)