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When you create a signature (to be added to all your outgoing emails automatically) in Yahoo! Mail, you can make liberal use of all the fancy text formatting tools available via the Color and Graphics editor (provided you use Internet Explorer on Windows).
You cannot, however, add images to your Yahoo! Mail signature through this route. A little manual editing of the HTML involved or some copying and pasting do the trick, however, if the image you want to insert in your signature is available from a publicly accessible web server.

Insert an Image in Your Yahoo! Mail Signature
To add an image to your email signature in Yahoo! Mail:

•Open the image you want to insert in Internet Explorer or Mozilla Firefox.
•The image must be on a web server, i.e. its address must start with “http://”. You cannot use an image that resides only on your hard disk.
•If you don’t have a web site, you can use a free image hosting service instead.
•If your image is larger than some 100×100 pixels, consider shrinking it to more handy proportions before you put it online.
•To open an image that appears as part of a web page:
•In Internet Explorer:
•Click on the image with the right mouse button.
•Select Properties from the menu.
•Highlight the entire string under Address: (URL.
•Press Ctrl-C.
•Click OK.
•Highlight the address bar.
•Click Ctrl-V.
•Press Enter.
•In Mozilla Firefox:
•Click on the image with the right mouse button.
•Select View Image (or, if not available, View Background Image) from the menu.
•Press Ctrl-A (Windows, Linux) or Command-A (Mac).
•Now press Ctrl-C (Windows, Linux) or Command-C (Mac).
•Open Yahoo! Mail.
•Select Options | Mail Options from the top right navigation area.
•Go to the Signature category.
•Follow the Rich Text link, if available.
•Position the cursor where you want to insert your image.
•Press Ctrl-V (Windows, Linux) or Command-V (Mac).
•If you use an image uploaded to a free image hosting service:
•Click on the image.
•Link the image to the image’s page address at the free image hosting service (something resembling “http://img.imageshack.us/my.php?image=example.jpg” if you use ImageShack, for example).
•Click Save Changes.
Insert an Image in Your Yahoo! Mail Classic Signature
To add a graphic to your email signature in Yahoo! Mail Classic:

•›› Step by Step Screenshot Walkthrough
•Access Yahoo! Mail with Windows Internet Explorer.
•Select Mail Options from the navigation bar.
•Follow the Signature link.
•Make sure Rich Text is checked.
•Insert the image using the HTML  tag.
•To place an image at the left of your signature, insert:

•Make sure the image is accessible on a web server and reasonably small in proportions (not higher than about 75 pixels).
•Click Save.