Answer is codepen does not support local uploads of your own images unless you get their premium service. (I do not recommend getting it)
Use an image hosting service to host your local image, then link to that hosted version. Personally I use github because I also use it to do version control on the pages i’m building.
Also note that when using the <img> tag, use a “=” (equals to) symbol, instead of “:” (colon) like suggested above.