Unless your computer is ALWAYS connected to the internet, the link would regularly break whenever you went offline. Additionally, if you ever move the image (or rename the image) on your hard drive, the link would break. Technically-speaking, the internet doesn't work that way.
(Technically, it is possible to insert a link to an image on your computer, but it would not be viewable by anyone else since it would reference the same folder/etc. on their OWN computer - and that image wouldn't exist there.)