You can add images to your page using the content block, but if you want to lock down a block area for a more controlled image placement (like a header area) this image block can be very powerful.
You can add a JPG, GIF or PNG.
The On-State field is optional but typically will show on roll over of the image in the page.
The Link URL is where the image links to if the visitor clicks it.
The Alt Text/Caption area is a short description that is useful for SEO.
The Maximum Dimensions let you control the size of the image. concrete5 will fit the image inside this space, creating a new copy automatically behind the scenes so you're not wasting bandwidth.