When you insert a picture into a Word document, it places the image inline with text. This means that the image will not have words wrapped around it. Select wrap text from the format tab under picture tools (or right click image) and choose through. Then drag the image anywhere in the document to have words wrap around it. Resizing the image sometimes helps with the text flow.
Before text wrap:
After text wrap through:
Download my Word keyboard shortcut cheat sheet.