Go to user CP (control panel), and on the left hand menu, click on the option "edit avatar". From there you can choose any default pics, or upload or link to your own.
The reason you're not seeing a way to use custom avatars is because of your member status. "New Members" don't have the ability to upload custom avatars.
Once you have been around for 29 days AND have at least 10 posts OR 1 positive rep point, you get bumped up to a "Registered User", were you will have an increased about PM space, Gallery space, custom avatars, etc.
Hope this helps and we look forward to your participation!