You have to host it somewhere. Such as imgur.com. This may change in the future. You'll notice when you write your blog you can now drag and drop or select to upload pics to your blog as your write it. In the past all images had to be hosted offsite. So, even though the updates have included inserting an image without 3rd party hosting, to change your profile pic, you must first host it, then you copy the paste link by clicking the settings tab beside your wallet tab.