With a Branchfire registration, you can import and mark up image files in common formats like GIF, JPEG, and PNG. Images can be imported via all the same methods (Box, Dropbox, email, Google Drive, iTunes, OneDrive, Safari, WebDAV) as other document formats. They can also be imported from iAnnotate's "Import Image" button in the Library by tapping Add > Import Image.
Upon tapping Import Image, you'll get the option of importing from either the iPad Camera or Photo Library. Once you've named the image, it will be filed into whichever folder/connection you had open when you chose to import it.
The image can be viewed in iAnnotate in its original file format but must be converted to PDF in order to be annotated. Open the image file and select any tool to be prompted to make and name a PDF copy. The name field will be auto-populated with the original file name plus "-Annotated" by default.