As I understand it, those albums are meant as a way of sharing images from your own computer with other members. If you try to link (in a post, VM or PM) to an image that's only on your own hard drive, not online, the image won't show up. Once you upload something to an album, not only can other members view it there but you can also link to it in posts, VMs and PMs.

If an image is already available online, there's usually not much point in putting a copy in your album too.