For this milestone, you will begin to develop the user interface for your project. Think of this as a flexible "brain storming" phase of your project. Like in previous milestones, you will get a chance to revise your UI design and can still change it quite dramatically with no negative consequences.
You will be turning in 4 images - depending on the complexity of your project, you might need to put more than one screen per image. At this point, you can use a lot of different tools to "describe" your user interface.
A lot of people like a whiteboard or pad of paper and to hand-draw your UI. It is nice because it is easily revised and you can make nice links between the diffeent screens. And if it is a whiteboard you can erase and redo very easily. You can turn in photos of your design.
You can use Powerpoint or some other graphic editor where you use boxes, text, and graphics to describe your UI. This allows a little more graphic fidelity and gives you a sense of what it will actually look like.
There are tools that are specifically designed to layout user interfaces like OminGraffle. These produce pretty diagrams and often have plugins that make you UIs look "sort of hand-drawn". It is a cool look for those looking at your design - it communicates that the design is "in progresss", "under development", and "open to suggestion".
In general keep this phase fun and light - focus on ideas - not the prettiness of the ideas. Get somthing is good enough to communicate you ideas, and then share it and get feedback. Multiple revisions is more important that making the first UI layout gorgeous. You don't want to have spent so much time making your first design so pretty thant you are resistant to change that might come from suggestions.