(Besides uploading a HTML file, you can also send plain text newsletters, use the WYSIWYG editor or use the Email Newsletter Builder)

If you have created a HTML document in a HTML editor (Dreamweaver, etc...) or in a word processor (Microsoft Word etc...), you can upload your document, add a subject line and you're done.

If your file is referring to images not yet on the Internet, you'll be asked to upload these images to YMLP and YMLP will host the images on your behalf ("image hosting" feature).
Screen Shot:  Uploading a HTML document