Start making your signature using a 2-step wizard. More on digital signatures here. This typically involves a more complicated process involving private and public encryption keys. Click where you want the line. Sign PDF document. Or you are just willing to add a signature image to use any time you sign the document?
Legal and legitimate signatures. Click Insert > Signature … Digital signatures use a certificate-based digital ID issued by an accredited Certificate Authority (CA) or Trust Service Provider (TSP) so when you digitally sign a document, your identity is uniquely linked to you, the signature is bound to the document with encryption, and everything can be verified using underlying technology known as Public Key Infrastructure (PKI). This free tool helps you create a free downloadable electronic signature, which is the same as an online signature. Draw digital signatures on any computer, tablet or mobile device, and upload it to any PDF that needs an electronic signature. Digital signatures are a type of electronic signature with encrypted information that helps verify the authenticity of messages and documents. Click Insert > Quick Parts > AutoText, and then click the name of your signature block.
Use the Signature Line command to insert a signature line with an X by it to show where to sign a document.
The method you have been following is to predefined digital signature and there you can only add .pdf format. Insert a signature line. Depending on the nature of the document being signed, an electronic signature in the form of a scanned image of the signer's hand written signature is considered to be legally binding in most countries, but does vary by country and at state levels.
However, many regulations (e.g. Get a free .png signature image to use in Google Docs, Word documents, etc. Looking at the screenshot, I believe you have been trying to set-up a signature image for Digital Signature?