When a picture or piece of clip art is selected, the Picture Tools Format tab displays itself on the right side of the Ribbon. On the Picture Tools Format tab, click once on the Wrap Text button to display your text wrapping options. With Word 2010, you can now drag the graphic into position using most of these text wrapping choices. You can also apply text wrapping by right-clicking on the image. For more specific placement options, choose More Layout Options from the Wrap Text button.
Seldom do we actually want a picture to be aligned with text using the In Line with Text option. This style (which is the default) insets the image in the text at the location of the insertion point and the image moves as you add or delete text. Also, the text does not wrap around the graphic therefore white space extends to the margins on both sides of the image. Example below.
The Square style wraps the text around all sides of the square bounding the graphic. The graphic moves as you add or delete text. Example below.
The Tight style hugs the text around the image in an irregular shape bounding the actual image. The graphic moves as you add or delete text.
The Behind Text option has no border around the image. The image simply sits on its own layer behind the text. Example below.
The In Front of Text option has no border around the image. The image sits on its own layer on top of the text.
The Top and Bottom wrap has no border around the clip art. The picture is situated horizontally between text which sits at the top and bottom of the image. Example below. If you are going to be adding a lot of pictures and clip art to your Word documents, you can save yourself time and a lot of extra steps by setting your default preferences for how text automatically wraps when you insert a graphic into your work.
More Layout Options
You can choose More Layout Options from the Wrap Text menu for more accurate control over the position of an image and how text wraps.