You upload it to a site. I use imgur. So what you do is you go to the website, click upload image. Select the file. Then on the right it will give you links. Copy the one that says "Message boards and forums" then paste it into your signature.
If you're using Gyazo: Click your Gyazo icon. Screenshot the image you wanted to use. Press the "Copy image" option: Ctrl+v is the paste command, once you're at your signature. This should correctly upload your image.
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