You can now upload photos to your blog(s) using Blogger Images; just click the image icon in the post editor's toolbar.
When you click this icon, you'll get a window that allows you to select an image or multiple images from your computer. Click the Browse button to locate the ones you want. Alternatively, you can enter the URL of an image that's already online and insert it into your post.
If you click the link to choose a layout, you can customize the way your images will appear in your post:
The left, center and right options determine how the text of your post flows around the pictures. The size option lets you scale the pictures to different sizes within this posting area. Note that the picture will still be uploaded in its full size; this option just determines how it's scaled within the content of your post.