Place your cursor where you want it, click "Insert", "Picture", "From file",
browse to the folder where you have your picture stored and select it. Once
inserted, you basically have two options on how to place it (In-line,
Floating over text). In-line is essentially a paragraph by itself or part
of an existing paragraph. "Floating over text" is just that. Sort of like
taping a picture onto a piece of paper, but you can move it around where you
like and wrap text around it if desired. Easiest way to see the various
types is to immediately right-click your picture after you insert it and
select "Format picture" (near the bottom). Click the "Layout" TAB and play
around with the options.
Hope this helps!