Wallpaper, in the world of iPhone, refers to the photo that appears on the Unlock screen every time you wake the iPhone. On a new iPhone, an Earth-from-space photo appears there.
You can replace the Earth very easily (at least the photo of it), either with one of your photos or one of Apple's.
Use One of Your Photos
Open one of your photos, as described in the previous pages. Tap the button, and then tap Use as Wallpaper.
You're now offered the Move and Scale screen so you can fit your rectangular photo within the square wallpaper "frame." Pinch or spread to enlarge the shot (Pinch and Spread); drag your finger on the screen to scroll and center it.
Finally, tap Set Wallpaper to commit the photo to your Unlock screen.
Use an Apple Photo
The iPhone comes stocked with a few professional, presized photos that you can use as your Unlock-screen wallpaper until you get your own photographic skills in shape.
To find them, start on the Home screen. Tap Settings→Wallpaper→Wallpaper. You see a screen full of thumbnail miniatures; tap one to see what it looks like at full size. If it looks good, tap Set Wallpaper. (How did Apple get the rights to the Mona Lisa, anyway?)