They probably meant VARBINARY(MAX) - which gives you 2GB of binary data - enough for [almost] any image. This is the BLOB method.
its as simple as this. If your application can convert the image to an array of bytes - e.g. if your using .NET WebClient.DownloadData(Url), then you can pass that data to SQL to store in a varbinary(max) field.
Otherwise, you can just store the Url in a VARCHAR(1024) field - lenght determined by how long your Urls are likely to be.
Technically its more complex to then serve the image back from a BLOB, as you need to create a Response with headers, and write the binary data to it. If you just serve a Url, the web browser downloads it and displays it correctly.
There will be increased traffic between the SQL Server and Web Server using the BLOB method.
Either method is acceptable. Its really a matter of examining how many images you are dealing with and whether you want them on the SQL SErver or on the WebServer.