First, you have to summon the proper set of options, which you can do by clicking the pencil icon on the toolbar within Preview. This enables the Annotation Toolbar, which you can also summon through command-shift-A, or by going to the Edit menu.
With that toolbar showing, select the icon showing the “S” on a line. If you click and hold, you’ll see an option that says, “Create signatures from FaceTime camera (built-in).” Once you select that, your camera will turn on and you’ll be asked to hold up a piece of white paper with your signature, as demonstrated here:
Once you accept this signature, Preview will save it (permanently, if the checkbox is selected) and allow you to insert it into any PDF that you open.
This is one of those hidden gems that can save you a lot of time (and paper) if you regularly have to sign PDFs.