Create or Open your Post
Create a new post (tutorial here) or open an existing new post by clicking on Posts and selecting the Post you want to edit.
Add in-line Images
Making sure that you are on the Visual tab in the post editor, click on where you would like to insert the image.
Click on Add Media (above the content editor). In the pop up dialog box, either upload an image or select an image from your media library. At the bottom of the right hand panel, select the Alignment you would like for your image (left, center, right), the Link properties for the image and the Size. Click Insert into post.
Add Featured Image
In the right hand column, scroll down to Featured Image and click Set Featured Image. In the pop up dialog box, either upload an image or select an image from your media library. Click Insert into post (bottom of right hand panel).