You need an image with a defined odd shape for best results when the back ground is removed. Open Photoshop, and open your chosen image. If it is in a jpeg format you can use different ways to remove the background. I have used the Magic eraser tool on this occasion at the bottom of this image. Versions of 5.5 and above has this option. Use the E key to select the magic eraser if previously selected. You will have to try different tolerances to achieve a 'clean' removal. If any of the background is left in the image, it becomes part of that image and the defined shape wanted isn't achieved.
Save as (format) CompuServe GIF
Open your document in Word as before > Insert > Picture > From file > Browse to the location of the gif.
Now right click on the gif > Format picture > Layout > Select 'Tight'. Further settings can be seen in the 'Advanced' section and experimentation with the 'Wrap Text' and 'Distance from text' options making a difference.
However, the document itself will have different results on different images inserted. If you have very long words in the area of insertion, the 'wrapping' will not appear so 'tight' as it would break the words apart making them unreadable if this happened.
He's another . . . . >> Example of me first thing!