Can I insulate the outside of a house?

You might consider an EIFS system. Check it out here: http://www.wbdg.org/design/env_wall_eifs.php

Usually insulation is between the inside and the outside of the walls. I’m a bit confused.

Judi, yes, insulation usually is between the inside and the out, but if you follow the link gratefully supplied by steelmarket you will see it can go on the exterior too. link.

@eyeguy, I just remembered another way to add insulation to the exterior of your house (although you may not like this one). Some vinyl and aluminum siding has an inner, integral lining of foam insulation (usually about 1/2 inch at most). In general, foam adds about R-7 per inch of thickness (actual value depends upon the type of foam). Of course, you could install the siding over rigid foam board as well.

it seems like a way to disrupt thermal bridging