CyberNotes have a great tutorial on formatting your photos in Word. Lots of helpful graphics to get you on your way, too.
“Microsoft Word 2007 has made it easy for you to format your photos and make them look like you spent a lot of time adding effects. To make use of these features, you’ll want to start by inserting either a picture or clip art. You’ll do this by clicking on the “insert” tab, and then clicking either picture, or clip art, depending on what you want to work with.