First, in order to place an image inline (ON the webpage) in an answer (not a question post or answer to your own question), you must have enough reputation. For example, on meta.stackexchange.com (this site) you must have at least 5 reputation points. On Stack Overflow, you must have at least 10 reputation points to post an image / photo inline, ON the webpage, for an answer.
If you do not have enough reputation, when you are doing an answer to someone else's question, or editing an answer to someone else's question, using the method I provide below, Stack Exchange will give you an error message when you try to save your answer stating you do not have enough reputation to include an image using the method provided below.
There is an exception to this rule: if it is your own question post or an answer to your own post, you don't need any amount of reputation to include an inline image, as I have done below in this answer and in this question above.
You may still link an image (instructions for doing so are on the "advanced help" page linked at the top of the edit box) on an answer that you do not have enough reputation in order to post an inline image, but you may not post an answer to someone else's question with an inline image until you have enough reputation.
Note that if you use the graphical / GUI way of adding an inline image to a question post or answer, by pressing the button on the WYSIWYG post/answer editor, and you do not have adequate reputation for adding an inline image, no warning will be displayed by Stack Exchange indicating you do not have the adequate reputation for including inline images on your posts on the given Stack Exchange site you are using, and your image will simply be linked to and not included inline on the webpage, with no warning.
Please note, reputation on one Stack Exchange site like Stack Overflow does not carry over to other Stack Exchange sites, like this one: meta.stackexchange.com. So you may be able to post inline images in answers to other people's questions on some Stack Exchange sites and not others, until you have adequate reputation on the site your current answer post targets.
In order to post an answer to someone else's question with an inline image, assuming you have enough reputation on your chosen Stack Exchange site (i.e. Stack Overflow), or to post an a question or an answer to your own question with an inline image (doesn't require a minimum amount of reputation) you may use the following syntax:
It will look like this (inline image on webpage) if you have done so correctly and have adequate reputation:
Note that you now appear to have to use
https: as the protocol in the link for inline images.
This detail escaped me at first, and doesn't appear to be documented in "advanced help" for markdown on posts.
Most free widely-available public image hosting sites, including Imgur and tinypic, offer HTTPS hosting, and all you have to do is take the link they provide you, like:
http://i.stack.imgur.com/bmuVz.png and change the
https: like so:
Then add the link in your post or answer like:
and, BOOM!, you should have an inline comment!
I hope this helps. I found this very confusing at first, and I found the documentation very lacking. Perhaps the lacking documentation is intentional, so that everyone isn't posting pictures inline and posts which can be difficult to moderate (a picture could contain anything, right! hard to filter automatically). However I find inline pictures in posts and answers invaluable, so hopefully this helps you!
For resizing images:
Resizing an image in a post?
FAQ page addressing this issue:
How to upload an image to a post?
Hopefully Google and DuckDuckGo pick up this post so people can find it easily. I was unable to find this FAQ easily for this issue using simple Google queries. This post is an ordinary (duplicate) question with several keywords in the question and the answer that people are likely to use on a search engine.