The Format/Background process has a new look in PowerPoint 2007.  The steps are the same, but you will see a new option along with a change in terminology.

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Applying a new template to your presentation

Select the Design tab on the ribbon at the top of your screen. Click the dropdown arrow next to Backgrounds.

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This will open the Format palette. Choose Picture or texture fill and select Insert from File to navigate to the location where your backgrounds are located.. 

Navigate as usual to the appropriate location on your hard drive or CD and select the background you want to use. Choose Insert.

When you return to the previous palette, make certain that Tile picture as texture is NOT selected if you are using a full size image. Exit by clicking Close.  (This is a change from Apply in previous versions.)  Note that you still have the “Apply to All” option available.