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Doing so will prompt a drop-down menu. This option is at the bottom of the drop-down menu. It's the second link from the top of this window. Doing so will select it as your desktop background.  You can also click the Windows Wallpapers box near the top of the window to pick a different pictures folder (e.g., "Pictures"). If you want to look for a specific picture, click Browse. This section is beneath the "How should the picture be positioned?" heading. Your options (from left to right) include a full-screen version of the picture, a grid comprised of your photo, and a centered version of the picture. It's at the bottom of the window. Doing so will apply your selected picture to the desktop background.
Right-click an empty space on the desktop. Click Personalize. Click "Desktop Background". Click a picture. Click a picture positioning option. Click OK.