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WordPress uses Gravatar, you can find more information about it here.
On WordPress.com, we use Gravatar to associate an avatar with a user’s account. If you’ve set up a Gravatar, it will be displayed when you post to the forums or comment on a blog, and it may also appear if your blog is featured on a tag page.
Custom – Backend
If you manually want to add images for your users, there are plenty plugins available to use:
Custom – Frontend
You could use Front-End Users, this plugin supports the User Avatar plugin.
This topic is being discussed here.