Before you can use this you will need to host your image somewhere. Try Photohostess if you do not have hosting of your own.
Simply paste your image into image url text input and your button code into the textarea.
If you do use photohostess, you should use the naked photohostess.com link on the bottom of the list of links they provide you with, the one that has a "Direct" label to the right of it. It must start with "http://" or it won't work.