It is indeed.
In your CP there should be an option to Edit Signature on the left side of the screen. Click on that and you will see a signature box.
Copy and paste the IMG code from Photobucket (or whatever service you use) into the signature box and save when finished.
Then,
voile you have an image in your siggy.
I hope this helps.
*edit
Sadly, it appears no avatars are allowed though.
