1. View > Header and Footer
2. Insert > Picture > From File…
Choose the background image to insert. It will look funky, because Word puts it in the Header text area.
3. Select the image, right-click (control-click) it and choose Format Picture…
4. Under Wrapping Style (the little dog icons), select Behind text
5. You will now be able to resize and drag the image around in the document
6. When you’re done placing the background image, choose View > Header and Footer to leave the editing mode.