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On the top of the window, you’ll notice a series of tabs. Most likely when you’re starting a new document, the tab will be at “Home” by default. For a new image, you’ll want to select “Insert." Notice how you can still type your document even with the new tab selected.
From there, choose “Picture."
Select any image you want. If the picture you want to insert has dimensions larger than the page size, Word will automatically reduce the image so that it fits not only on the page, but within the printable margins, ensuring that no part of your picture will be cut-off when the document is printed. When you find the picture you want, click “Insert”. There is a drop-down menu on the button, as you’ve probably noticed. For now, don’t worry about it and just insert the picture as normal.

click to enlarge