How do users add avatars (images) to their profiles?

WordPress uses Gravatar to add avatars (user images). Register a free account at http://gravatar.com, associate it with the email you're using on your WordPress site and upload your avatar image. Now go back to your site and within a short amount of time your avatar will show up in your comments, profile page etc. If you want people to upload an avatar from your own site instead, use a plugin such as "Add Local Avatar".