Its just the name given for the photo next to your forum name when you post. A jpeg or gif will work as is, no need to convert it. The avatar section of the User CP (user control panel) allows you to choose from existing photos or to upload your own.
It's not a dumb question if you haven't used a discussion forum before. I'll suggest that you look through the User CP area as it has a lot of options in there you wouldn't know are available otherwise.