Image formatting/[IMAGE] button?

Originally tried posting this in the spam section, but for whatever reason, [IMAGE] button only appears to allow uploaded files to be posted within certain categories. I was wondering if the images’ formats would remain the same or be changed to .png from the [IMAGE] button.

Below is a test!:

[Only registered and activated users can see links. Click Here To Register...]

[Only registered and activated users can see links. Click Here To Register...]

Sorry if this isn’t allowed to be posted here and please move it to the appropriate section if not!

Thank you in advance.

EDIT: Apparently uploading files via photo library converts it from an image altogether to a broken link?