First, edit picture or .jpg file you wish to use
Make sure to make it a small size so as not to fill up inboxes
Upload it to
www.photobucket.com or other hosting site that allows directlinking
Log into Yahoo Mail
Click on Options
Click on Signature
Click on View HTML Source
Copy and Paste Picture TAG code from Photobucket or other hosting site that allows directlinking.
Un Click View HTML Source and you should see your picture
Click Save