By default CKEditor 4 does not include a file manager, but it can be easily integrated with an external tool (file browser / uploader) thanks to the File Browser plugin which is included in every preset. You can add a file manager following File Manager Integration guide.
For managing files, you can also install CKFinder, a CKSource tool designed to easily upload and manage multiple files. It’s a commercial product so it’s not available in the Open Source version and you would need a license to be able to download and use it. You can test CKFinder yourself at the CKFinder demo page where you can see its full potential. If you still have doubts, you can download a free trial and test it directly on your site.
Since CKEditor 4.5 it is possible to enable uploading images pasted from clipboard or dragged and dropped into the editor. Please refer to the Uploading Dropped or Pasted Files article for more information.
Do note that this still requires integrating a file manager to handle the server-side part of the upload.
From Q4 2017 a new CKSource plugin will be available for CKEditor 4 called Easy Image. Easy Image enables inserting images inside the editor which are automatically rescaled, optimised, responsive and delivered through an extremely fast CDN. Easy Image is part of the CKEditor Cloud Services offer and doesn’t require much integration effort or server side setup.