You click "user CP" at the top, and then "edit avatar", and from there you can paste an image URL (e.g. www.website.com/image.jpg), upload a picture from your computer, or use one of the gallery images. Here are some screenshots with the buttons you need to click highlighted in red because I can't be bothered to try and explain where they are properly :P
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http://img96.imageshack.us/img96/413/71980819.jpg
http://img196.imageshack.us/img196/1457/84132031.jpg