Dosset & Dodgyshirt have provided the corrct answer for Windows XP but for earlier versions of Windows you'll need to do this:
Right-click on the desktop.
Select 'Properties'
Check that the 'Background' tab is selected.
Click 'Browse'.
Navigate to the 'My Pictures' folder.
Click on the required picture file.
Choose 'Centre', 'Tile' or 'Stretch' from the menu tab.
Click 'Apply'.
Click 'OK'.