The reason you can't link directly to your hard drive is that
in order to do so, you would have to open your computer up to anyone who clicked on the link.
Think of it this way - say you have some photos you carry around in those plastic sleeves in your wallet. You want to show them to us here at FK, but since we are not all in "the kitchen" at the same time, you leave your wallet on the table and let all of us open it up to look at the pictures when we come into the room (FK). This means that anyone that comes in to the "kitchen" (FK) could open your wallet and look at your pictures, along with anything else you happen to have in there. That is the equivalent of letting someone access your computer hard drive to see a picture.
When you upload a photo from your hard drive to a blog or photo hosting site, you are actually making a copy of it and putting it somewhere that is openly accessible to others on the net.
So to continue with the first example – instead of you leaving your wallet out for everyone to open, you take the photos out, make a copy of them, and leave them on the table for us to see. That’s what you do when you upload photos to a hosting site or blog – you make them accessible without letting others have access to your computer.