When you do it right, it should look like this:
Code:
[image]http://i1023.photobucket.com/albums/af352/brindle_bucket/newbaby.jpg[/image]
...which results in this:

Problem is, you're not getting the right URL. You're taking it from the location/address bar:
Code:
http://s1023.photobucket.com/albums/af352/brindle_bucket/?action=view¤t=newbaby.jpg&newest=1
Which is not the "direct" image location, it's the page that the image is loaded in.
If you right-click the image above and from the little menu that pops up you select "Copy Image Location" or something similar depending on the browser you're using, you'll get the right image location. That right-click trick also works on Photobucket.