Illustrations

Insert/Paste Pictures as
This option changes the default insertion behaviour
in line with text - the picture/object is inserted into the text flow and moved as the text flow changes
in front of text" - the picture/object is positioned at an absolute position in the document and will not change when the text flow changes.

You can also change the positioning for an individual picture (or object)
Right click and select (Format > Object)

Options

(Edit tab, Picture editor) - The application you want to use as your picture editor, either Microsoft Word or Photo Editor.
(Edit tab, Insert/Paste pictures as - Changes the default beviour for how pictures and objects are inserted.
Word Options > Advanced > Web Options > Picture Tab
Picture Tools > Format > Compress Pictures > Options
Word Options > Advanced > Image Size and Quality (add in 2010)

To resize a shape or picture keeping the ratio of height and width the same hold down (Ctrl + Shift) while you drag the mouse.
If you want to align a group of circles so they all appear concentrically select all the shapes, display the ??
Drawing toolbar and select (Drawing > Align Objects) ??
If you Ungroup a ClipArt object you can no longer edit or crop it
When you insert a picture and you resize it Word displays the current size as a percentage of the original width and height in the bottom left window. As long as the two numbers match then the scaling is distortion free
It is possible to add shapes and pictures to your AutoText entries.
To resize a shape or picture proportionally, hold down the Ctrl key while dragging a corner.
You can easily crop a picture or graphic by selecting the Picture toolbar (View > Toolbars > Picture) and selecting the crop button which resembles a type tread.

Shapes

If you add text to an Autoshape the text moves with the shape but will not be rotated or flipped
You can also place pictures on your envelopes as well. Once the picture is in place select it and choose (Insert > AutoText) select new and give it the name "EnvelopeExtra1"
There are over 100 adjustable AutoShapes available.

In Word there are two types of image or picture, those that "float" over the text and those that are "in-line". Images that "float" are only displayed in Page Layour view and not displayed in Normal view.

To position your illustrations use (Format > Picture / Object ). ??

The Drawing toolbar is displayed at the bottom of the screen (by default) although it can be dragged elsewhere. Drawings can be created either directly in Page Layout view or as a separate picture.

In Page Layout view you can draw directly on your text. The drawing can remain fixed at a position on a page or it can be anchored to a paragraph. This sort of drawing is a floating image.
A drawing can be created as a separate picture and this is often the best method. The picture can be left as a floating image or changed into a in-line image. A drawing workspace is displayed with an Edit Picture toolbar.
You can create your picture within the boundary shown, or if your drawing element is outside the boundary the button on the Edit Picture toolbar will enclose all drawing elements in the picture boundary.
Charts can be linked into your Word documents although this is definitely not recommended as it uses a large amount of memory and can drastically increase the size of your file. It will also increase the chance of Word crashing.
Try to keep pictures as small as possible this will help to reduce the file size.

If you are going to insert a large number of the same AutoShape you can easily change the default options for when a new AutoShape is inserted. Insert the first AutoShape and format accordingly. Right click the shape and click "Set AutoShape defaults". The next time that particular AutoShape is inserted it will have the modified format.

You can edit a picture in a document, just double click it

Inline Shapes

An inline shape represents an object in the text layer of a document.
An inline shape can only be a picture, an OLE object, or an ActiveX control
InlineShape objects are treated like characters and are positioned as characters within a line of text

ClipArt

You can insert a clip art from the Clip Gallery or a picture. Use the options on the Drawing toolbar to edit the object (ie change the fill / line colours etc)
When you click (Insert > Picture > ClipArt). Word looks in the foillowing folder C:\Program Files\Micosoft Office\Clipart\. In this folder is a bunch of .gif and .wmf picture files along with shortcuts to C:\Program Files\Micorosoft Office\Office\Web Page Templates\Styles
.gif & .wmf files

Note: Always put graphs and pictures in tables
line spacing for all graphs is before 6, after 0
placeholders
All graphs and charts are centre justified
Change the measurement units to cm or points
To increase the size of a graphic proportionally hold down Ctrl, while dragging a corner.

Pictures

You can crop pictures, add border adjust the brightness and contrast
Word defaults by floating pictures over text (letting you position them preciseley on the page, infront or behind text)
When moving pictures (when floated over text) right-click > Format > Picture Got to position and uncheck "move object with text" (it makes it slightly easier) always group your related pictures / pictures.
Inserting Pictures can greatly increase the size of your document and will result in your document taking a logn time to save.
One easy way to reduce the size is to insert the graphic as a link rather than the graphics file itself. The picture will print although you can't alter it (in Word)
To insert a picture as a link
(Insert > Picture); select from file; check the box "link to file"; uncheck the box "save with document".
Do not use the (Insert > Object) unless you have no choice. The only way to insert mathematical equations though is to use (Insert > Object).
Pictures in bitmaps cannot be ungrouped or modified
To crop a graphic, make the Picture toolbar visible and select the crop button