To keep things simple, you can just put the image in the same directory as python.exe. Otherwise, you can just replace 'image.jpg' in the second line with the full path to your image file. The only catch is that you need to use two backslashes wherever you would normally have just one - as in 'C:\\Users\\Me\\Desktop\\image.jpg'.
To install Pillow, just open a Windows command prompt, navigate to C:\Python27\Scripts (or wherever you installed Python) and type "easy_install Pillow". (If the first line of the code, "from PIL import Image", gives you an error message, then you need to install Pillow.)