The easiest way to embed an image that already hosted online is to wrap the URL with vBulletin's Image Tags - [img]
Here's the URL of my image:
Here is that URL with the code applied. Ignore the spaces I've included to display the basic text instead of the image:
[img ]https://c1.staticflickr.com/9/8464/28937627701_0733754277_z.jpg[ /img]
Stripping out those spaces gives you the desired effect with an embedded image.
In the box where you compose your posts you'll also find this icon
which when clicked on brings up a box asking for the URL. Pasting an image URL there will apply the [IMG] tags automagically when you click OK.
One thing to keep in mind is that if you are hosting the file externally, don't embed an image that is super high resolution as it will not be scaled down for other forum users and will be difficult to view.
If anyone might be interested in the high res version of that photo, you can grab it here
SFBayArea - You can also hit quote on my post to see how I used the [url] code to hyperlink that word to the larger image, or quote hushypushy's to see how the code is written when hyperlinking an embedded image to another image.