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There are several waysfor organisers and participants to upload photos into their course materials, depending on what section of the course you are working in.
In Assignments
All organisers can upload images as attachments to the assignments they create. You just need to go to the Attachment option, below the field where you have created your text, and you can upload any document or file, as long as it is smaller than 2MB.
When creating their submissions, participants can either upload images (as long as they are in the following file formats: pdf, txt, doc and odf) or embed the images directly in their text. This can be done by switching to the Rich Text Editor and using the Image embed button, much as you would do with a blog.
In Course Material
When creating course material, you can also either uplaod an image as an attachment, or embed it in the text.
In Discussions
If you're using the discussion space, you can also add images to a discussion by embedding them in the text.