From within any page, you should see a chain-link icon in the toolbar of the editor that looks like this:
The first icon adds a link, the second removes a link, and the third adds an anchor.
To create a link from an image, simply click on the image and go to the link icon in the editor. Follow the same steps as above.
Absolute links are appropriate for pages outside your website. For example, if the website domain I'm working on is "http://help.team-logic.com/" and I want to link to "http://www.example.com/index.html", I will use an absolute link.
Relative links are used when the page containing the link is on the same website as the link destination. For example, if the page I'm on is "http://help.team-logic.com/Add-links-to-a-page-or-website/" and I would like to link to "http://help.team-logic.com/Creating-and-Linking-to-Anchors/", I would use a relative link. Note the "http://help.team-logic.com/" part of the link must be the same. The link is relative to the site you are currently on.
Why can't I just make all absolute links?
Technically you can. It is not recommended if you ever decide to change your domain. If all the links are absolute and the domain name changes, all links will break.