OK! I do this a lot in Word!

You can do this in most variants of Word that I have tried. You can do this either BEFORE or AFTER inputting your text.

To input a picture for use as a watermark, get to the drop down menu, under Insert, and select Picture and then click on From File or From ClipArt if you have the picture already.

Next, after the picture is entered into the document, select the picture and double-click on it. This should open a Format Picture box to do things to the picture. It normally comes up in the Picture Tab. This should show something like Image Control in the middle. Where it says Colour (Color in the US) is a drop down menu. In the Word 2002, what you want is called Washout. In Word '97, it said Watermark.

Now, when you have done that, double click on the picture once more, and click on the tab in the Format Picture box which says Layout. Click on Behind Text for the Wrapping Style and Center Horizontal Alignment. For Vertical Alignment, you'll have to position it manually by dragging the picture around.

That's how I do it.