Watermark Style Background.

Step 1:
Open the Paint Shop Pro 7 Anniversary Edition Program and open any image in any format that you would like to make a background from.
An image that has variable contrast and colour is ideal but not essential.
Re-save this image in the .png format as this supports alpha transparency.

Step 2:
Promote the background image to a layer from the dropdown menu by selecting "Layers" / "Promote to layer".
Select the white area outside the image using the "Magic Wand" selection tool. Set the "Magic Wand" Tool Options to a tolerance of about 15 with no feathering of the edges.

Step 3:
Delete the selected white area leaving an image that is transparent where the white area used to be then deselect the selection using the "Magic Wand" selection tool and right clicking on the image.

Step 4:
To reduce the detail in the image to something that looks like it has been drawn rather than photographed I used the "Find All" edge effects filter.
To do this select "Effects" from the dropdown menu then select "Edge" / "Find All"

Step 5:
Change the reduced detail image to a negative coloured image using the dropdown menu by selecting "Colours" / "Negative Image" to give the effect of an image that has been drawn rather than photographed.

Step 6:
Select the transparent area again using the "Magic Wand" selection tool.
Use the "Flood Fill" tool to fill the selected area with a dark colour, (this colour will later form a 1 pixel outline to the chosen image so black is probably best).

Step 7:
Reduce the selected area by 1 pixel, to do this from the dropdown menu select "Selections" / "Modify" / "Contract..." then in the Contract Selection dialogue box set the number of pixels to 1..
Delete the darkened selection then deselect the selection using the "Magic Wand" selection tool and right clicking on the image.
Finally select and delete the outer 1 pixel square border using the "Magic Wand" selection tool, right click to deselect.

Step 8:
The image is now a lot more basic looking but it still contains many different colours within the image where by two colours would be ideal.
To achieve this we need to reduce the colour depth by selecting "Colours" / "Decrease Colour Depth" / "2 Colours (1 bit)..." leave the Decrease Colour Depth dialogue box on it's default settings!

Step 9:
Ironically now the image contains only 2 colours we need to increase the colour depth to enable the image to be promoted to a layer again even though the image will still only contain 2 colours!
Do this by selecting "Colours" / "Increase Colour Depth" / "16 Million Colours (24 bit)..." from the dropdown menu.
Then from the dropdown menu select "Layers" / "Promote to layer".

Step 10:
In this step all the white areas are going to be deleted to leave a transparent area so that only the black outline of the image is left behind.
To do this I used the Magic Wand selection tool and clicked on each white area I could find whilst holding down the shift key, (holding shift adds to the previous selected areas) then press delete to make all white areas transparent. Further areas can be deleted in the same manner should more white areas be found within the image.

Step 11:
Crop the image as close as possible to the outline of the image without loosing any edge detail using the Crop tool.
I required a specific height for my background so I needed to re-size the image to 122 pixels to suit my design so this next bit is optional.
From the dropdown menu select "Image" / "Resize" then in the Resize dialogue box make sure the radio button for "Pixel size" is selected and enter your desired image height. For "Resize type" use "Smart size".

Step 12:
In this instance I wanted to increase the canvas size by 50 pixels evenly about the image, (25 pixels each side) to make the overall height of the image 172 pixels.
From the dropdown menu select "Image" / "Canvas size and in the Change Canvas Size dialogue box enter the values that are 50 pixels bigger than the Current width and the Current height, elect to centre the image horizontally and vertically.
Again this step is optional but specific for my design.

Step 13:
The layer now needs to have the transparency reduced to give the watermark effect as the image is a bit harsh at 100% although it is down to personal taste.
From the Layer Pallette dropdown dialogue box (which should be visible, if it's not click the "Toggle Layer Pallette" icon on the toolbar) drag the transparency slider to the left to reduce the transparency I opted for 33% which seemed to be about right but it will vary from image to image.
Save this image in the .png format and it is ready to use as a watermark style background image.