Simple, right?
Now, what if you want to do the same but you want the link to open in a new window so the reader doesn't leave your blog? You'll need to upload your image to a photo hosting site on the internet then grab the URL of the image. Once you have the URL of your image go into Layout>Add a Gadget>HTML/JavaScript and copy/paste the following code.
<a href="http://www.URLYouWantToLinkTo.com" target="_blank">
<img src="http://www.URLOfYourImage.jpg" />
</a>
Make sure your image isn't wider than the sidebar, header or footer you are adding it to.