2) Open Imgur.com
3) Click "Upload Images":
4) Press Ctrl-V:
5) Click Start Upload:
6) Click on the icon next to the Direct Link:
7) Make an image link using it: <img src="http://i.imgur.com/k9lJ5Zf.png"> (I use Semagic to write posts, so I simply paste the link, select it, and press Ctrl-Alt-I to turn it into an image link).
I was using Photobucket at one point, but imgur makes it so easy to upload screenshots and suchlike that I've pretty much entirely moved over to using it.
Original post on Dreamwidth - there are comments there.