The image does need to be hosted in a location accessible to the PerfectForms server (OnPremise) or online.
A quick and easy way to do this within PerfectForms is to make a simple form containing a file attachment object (or multiple objects) and a submit button. Open an instance of that form and add your image(s). You can right click and copy the source URL of each attachment and keep those aside in a notepad. Submit that instance. You can now use those URLs in your other forms as picture source URLs. Another option is to use the Set Property >> source attachment, if you’re looking to display an image as it’s appended to the same form. You will want to account for the space that the image would potentially use, though. I also recommend hiding the picture object by default and using a set state to reveal it once the file attachment object has a value in it.
I hope this helps!