There are a couple of ways to do this. One way, which doesn't involve getting any software, is to insert the picture (I assume a photo) into Word. Then activate the drawing toolbar (View \ Toolbars). You can format the picture to go "behind text" so that you simply type regularly as you would any document -- this might mean using <Enter> till you get to the line you want and spaces to go to the right. Another way to get the text on is to create a text box (on the drawing toolbar), create the text you want, including no fill (so it's see-through) and move it over the photo.
Another way is to get a photo publishing software. With these, you can add text, change the shape of the photo, frame them, get rid of red eye and touch them up. These range widely in price, depending on how fancy you want to get. Some examples are Comcast PhotoShow, Adobe Photoshop and Corel Photo.
If you choose to go the route of Word and have trouble following the explanation, let me know and I'll give it to you step-by-step. If you decide to get photo editing software, feel free to post questions in JA.