It's a good idea to put all images for the site in one area. You can link to them from anywhere on the site, and they'll be easier to manage.

Preparing your images properly is an important first step in publishing good website content. Not all internet users have a broadband connection, and it will frustrate them if your site loads too slowly because of a large image. You'll lose your audience quickly if they cannot view your site as soon as possible. To that end, you should follow these guidelines, when working with images:

• Compress images to make the file size as small as possible. Less than 50 Kilobytes is ideal
  
• Make images less than the width of your content area, generally less than 400 pixels. Height should be less than about 400 pixels as well unless you are going to use the entire screen to display a picture. A good general size to shoot for is around 150 pixels square. This may seem small, but you also need room for text, navigation tabs, banners, etc.
  
• Keep in mind the more pictures you put on a webpage, the slower it will load.
• Only use JPG, GIF, or PNG formats. Other formats such as TIFF or BMP will not work with all browsers.
  
• When you save your images be sure to use "web-friendly" file names; that means No Spaces! Use hyphens or underscores when you need to seperate words like this: "picture-of-myself.jpg"

To summarize, there are three main factors to be aware of:

1. What are the dimensions of the image?
2. How big is the file?
3. What format is the file in?