Step 1: Understand what you can do
On the iPhone 4, you can use two images at any given time: one for the "lock" screen, and another for interior pages. (You can also choose to use the same image for both.) On earlier versions of the iPhone (such as the iPhone 3G and 3GS), you can only have a custom image on the lock screen.
Step 2: Choose your graphic
If you don't already have the graphic you want to use on your computer, download the image(s) you would like to add to your iPhone. For the iPhone 4, the ideal resolution is 640x960 pixels (which offers high enough quality to look crisp and clear on the Retina display). Get some free iPhone wallpaper graphics here!
Note that while you can resize your image as you add it as background wallpaper, it cannot be rotated. So if the picture you want is sideways or upside down, you will need to fix the graphic in an image editing program before using it as your iPhone wallpaper.
Step 3: Get the wallpaper on your iphone
Here are three different ways to import images to your iPhone:
VIA EMAIL: One of the easiest ways to get the graphic you have selected on to your iPhone is to email it to yourself, then download it from the mail program on your phone. Tap and hold to bring up the menu, save the image to your phone.
VIA THE WEB: You can also save a photo from a website you visit with the built-in Safari browser on your iPhone. Just navigate to the web page with the image, then tap and hold on the picture you want to save. A menu will pop up, then tap the "Save Image" button.
VIA ITUNES: To add an image to your phone by using iTunes, you will first need to put the graphic in an existing directory or create a new folder. After the image has been saved somewhere you will remember, connect your iPhone to your computer and open iTunes. Then navigate to your phone (under Devices) in iTunes, and click on the Photos tab. Find the directory with your new background images, and sync the photos with your iPhone. (Check out the iPhone manuals on the apple.com site for detailed instructions on how to sync pictures on your iPhone.)
Step 4: Find iPhone background image
Tap on the Photos (sunflower) icon on your iPhone and find the directory where you saved the wallpaper graphic. (If you saved a picture via email or directly from the web, it will be in your Camera Roll folder.)
STEP 5: SET YOUR iPhone wallpaper IMAGE
View your chosen image, tap it, then click on the box with arrow icon on the bottom left of your screen. A menu will pop up -- see an example at right -- then click the "Use as Wallpaper" option. From there, you can move and scale the photo as desired. When you're happy with how it looks, click the "Set" button.
Next, you will have the option to select the image to be your iPhone background for your home screen(s), the lock screen or both. (In the graphic at the top of the page, the lock screen is on the left and the home screen is on the right.) Make your choice, and your iPhone will take care of the rest.
For more tips on customizing your iPhone, check out:
How to download & install iPhone apps