Looking for the code in twentyten that allows users to select images for the header/banner

I am looking for the code that renders the below page. Where can I find it, it does not appear to be in functions.php?

I want to learn how they allow users to upload images

The code you are looking for is in functions.php (line 106 to 211).

To understand what they have done in TwentyTen, I would suggest that you read the following:

http://codex.wordpress.org/Function_Reference/add_custom_image_header