When I maintained a website, I created directories on the host (besides the main directory).
I named a directory whatever. (Paint Tutorial for example.)
I used Notepad to write the code.
For adding pictures or whatever I just used something like "Paint_text.png" or "Ding.wav" or "Folder.zip" (for downloading several things at once)
I would upload the html file to the desired directory & then upload all the needed pictures & stuff to it.
That's how I could just use "picture.png" in the html file.
That's just how I did it.
<a href="http://www.google.com"><img src="google.png" border="0"></a>