They mean the instance should block image hosting. You can still host images on imgur/etc and link to them. Just makes it imgur’s problem to mop up the bad stuff instead of a small instance host without the resources.

I mean, Reddit didn’t have image upload support for the majority of its life. Even on Lemmy, a lot of people still upload images and videos to imgur, streamable, etc instead of using Lemmy’s built in image uploader.

You can still have inages, just don’t store them on your server