The file formats you can upload are BMP (memory heavy), JPEG, TGA, GIF and PNG. If you're using an old version of Photoshop and you want to include transparent sections, you need to create an alpha channel (if you need more info on this I can help) and save as a PNG file. If you are using layers in your picture, then you need to merge them before you upload. In Photoshop, you can use the 'Save For Web' feature in the 'File' menu option.
In Second Life, click on the 'File' menu option at the top of the screen and select 'Upload an Image'. This will open a window and you will now be able to search for the picture you want from your computer. when you find it, click on it and then click on OK. This will open another window showing you the picture to upload, so click on OK.
Depending on the picture size and format, your location and traffic (along with other factors - such as SL actually working properly on any given day) it should take anywhere between 5 to 30 seconds to upload to SL. When it arrives, you are charged the flat rate of L$10 per picture.
Regardless of whether your picture is a texture, a family snapshot or an SL pic you sent to your computer so you could enhance it with Photoshop, it will - by default - be sent to your Textures folder in your inventory. It's up to you to drag it to the folder it needs to be in.
Any more questions about pictures in SL or some of this not clear enough? Send me an IM in SL. My SL name is River Kyomoon.