You just put the direct link you want for your avatar in the box. Unlike other places, it's not uploaded from your computer files so you'll have to find a site to host your pic if you go that route. I use tinypic.
I'm hosting mine through TinyPic, so here's how I did mine:
1. Click on Profile 2. Click "Modify Profile" 3. Scroll down to the "Personal Information" section - you'll see a box where it says "Avatar URL". 4. Paste in the http link from TinyPic. Note - don't put in the [/IMG] that surrounds the http link there - it won't show up if you do. Just use the http link, sans IMG brackets.