It depends on what image hosting site you are using, but yes, you can.
In photobucket, click the edit link on the picture you want to change, and then click resize. You can then enter in the new dimensions. As long as the "keep proportions" boxed is checked, it will auto adjust to keep the picture so it doesn't look all stretched out or squished.
As always, remember that our max picture size is 1024x768. Anything bigger than that, we ask that you just post a link to it if you don't want to resize it, instead of posting the actual picture.
I'm not sure what you're confused about. You click the browse button, it asks you what picture on your computer you want to upload, you find where you saved it on your computer, upload it, then it gives you a link all ready to go that you just have to copy and paste wherever you want to post it.
For everyone that has had issues recently with Photobucket and trying to embed pictures here using the IMG link, I have a solution. This has been bugging me for the past week that any images I add to newly created albums on Photobucket don't work properly when trying to embed them using the IMG link. I originally discovered that there is extra junk being added to the end of the file name, for any newly uploaded pictures. I verified that my old photos that were embedded still worked. I then uploaded a new picture to an old album and also verified that it still worked. It is only when a new album and picture is being used that this problem seems to happen. Well today I finally discovered how to fix the issue.
Follow this FAQ link on Photobucket. It describes how to turn off this auto file name scrambling that I made mention to earlier. With this setting turned off, embedded images from Photobucket will now work again. I would imagine that you will have to re-upload any images that were uploaded with this scrambling turned on.
The user settings on Photobucket can be accessed from going to the top right of the page, right next to help, where your user name is listed. Click on that and a drop down appears where you can then select User Settings. I ran into this same issue while trying to follow their FAQ earlier.