WordPress allows you to upload images, such as the one on the left, directly from the new post page. However, on a default Ubuntu install, the maximum upload size is 2MB.
It turns out the limitation is in PHP, and specifically in two settings that you can change in php.ini (/etc/php5/apache2/php.ini):
upload_max_filesize and post_max_size.
Set both of these to the value you want (20M), reload apache (apache2ctl graceful), and you're in business.