How to enable rich text formatting on 2010 list items

After we migrated a client to SharePoint 2010 from MOSS 2007 a user came to me with the question how she should add pictures to the Announcements she manages. She knew how to do it in MOSS 2007 but she couldn't figure it out in 2010. And when I took a look at it I was baffled at first as well. The New Announcement form didn't offer any options to insert pictures or links, even though the body of the Announcement was setup as Enhanced Rich Text which can hold those items. The pop-up form looks like this:

Then I realized that there are 2 ways SharePoint 2010 can display the View and Edit forms of List Items: in a Dialog that pops up (which is the default for any list in 2010) or in a new page.

When the list is configured to use the "new page" view and you choose to edit the item, the Ribbon pops up with the option to insert pictures, links etc. when you place your cursor in the Body of the Announcement:

The user now also has the option to do enhanced formatting on the text using this tab in the ribbon:

So if your users need to add more then just text to Announcements or other types of lists items, you should take the following steps for those lists:

1. Go to the List Settings
2. Select Advanced Settings
3. Scroll down to the bottom to the Dialog item
4. Select No for "Launch forms in a dialog?" and select OK: