I have seen imageshack used a lot but have never tried it myself until now.

Problem

Bloggers image hosting is limited (100mb) and does not work with lightbox.

Solution

Imageshack works great with blogger and lightbox. It allows for easy posting of small thumbnails that link to the bigger image. Normally the thumbnail would link to a web page containing the full version of the image but this is not compatible with lightbox (lightbox needs the actual image). The fix is very easy: Simply change the image link to the thumbnail link but remove the .th from in front of the extension.

My ~~main~~ complaint is that the thumbnails are too small. I could get around this by using the full image and scaling it down with css but this would wast some of my 300mb per image per hour bandwidth (not really a problem now but may become problematic with more readers).

Edit: My main complaint is that they loose images. Imageshack (along with pretty much every other media hosting site) is great for forum posts, but not for semi-permanent blogs.