Contacts have have a picture assigned which is also displayed in the email task of the application if the sender of the message is saved with a picture in one of your address books.
To add or replace a contact picture, click the Add (or Replace if the contact already has a picture) button right below the picture placeholder in the edit form. Then select an image on your computer using the file picker dialog that appears. Once selected, the picture will be uploaded and shown immediately as a preview. Note that the new picture will be stored with the contact only after you saved the contact.
In order to remove the currently assigned picture from a contact, use the Delete button right below the picture and save the contact to apply the changes.