There might be a script already made, but if you wish to do it yourself, you just need to look at file uploads at the PHP manual. There's sample code there that you could probably copy and paste, and modify for your site.
www.php.net/features.file-upload
Once the image is uploaded to your server and has been moved to a "permanent" location, it should just be a matter of echoing the path to the image within the <img> tags.
$path = "/home/user/images/imag.jpg";
<img src="<?php echo $path; ?>" // other attributes, etc.
