The markdown syntax for displaying images is indeed:

BUT: How to provide the url
?
- You probably do not want to clutter your repo with screenshots, they have nothing to do with code
- you might not want either to deal with the hassle of making your image available on the web... (upload it to a server... ).
So... you can use this awesome trick to make github host your image file. TDLR:
- create an issue on the issue list of your repo
- drag and drop your screenshot on this issue
- copy the markdown code that github has just created for you to display your image
- paste it on your readme (or wherever you want)
http://solutionoptimist.com/2013/12/28/awesome-github-tricks/