Go into your profile and select Forum Profile Information, then select "I will upload my own picture". You can then upload the pic directly from your computer (the only time you're able to do this on COL). Avatar pics have to be small, no bigger than 80 x 80 px.
Signature pics should ideally be no bigger than 150 x 150 px - some of the fancy collage pics have a tendency to be much bigger than this so please bear this in mind as we will remove the big ones
You can either make your own with photo editing software or some members have used websites like
http://www.pikistrips.com/