The ribbons get saved as an image and uploaded somewhere on the internet where you can access them. Then you embed that into your sig the same way you embed an image into a post (there is a dropdown menu in the lower right called "Insert other media" and an option in it that says "Insert image from URL". Paste in your image link, note that it must end in .jpg, .png, or some other file extension, and bingo). If you need to generate yourself a set of ribbons, you can do that at http://www.kerbaltek.com/ribbons.
Captain Sierra's post in How do people on the forum put ribbons on their profile was marked as the answer