If you want to insert images, figures, etc., we recommend .png or .tif files, with a resolution in the 200-600 dpi range. Most diagramming applications will export files in these formats and within that range by default.
In the Insert tab, select the type of object you want to insert, navigate to the file (if appropriate) and click Insert or OK.
Once an image is inserted, the Picture Format ribbon will appear, displaying editing, position, cropping, and text wrapping tools.
Special note for those using a Windows computer: After inserting a diagram/figure/image, we suggest you immediately set the Word Wrap for the image to "In line with text" On Windows, the default Word Wrap setting for inserted images/diagrams is "In front of text". This treats your image as a floating object that can be dragged and dropped anywhere. When you create a caption for such an image, the caption will also go into a floating text box. This means that the two objects can get separated, or can land on top of your content text, all of which is not good. It's also the source a common and disconcerting Word experience, where you try to move an image and it lands someplace completely different.
This is a classic issue with Word, and image positioning & text wrapping is often a challenging thing. There are many variables in the process, and many options available for tweaking those things.
It's important to understand the two separate, but related elements involved here -- image positioning and text wrapping. When you select an image (like a Figure), the Shape Format settings will appear in the Ribbon at the top, with tools to control those elements. Position controls where your image sits on the page. Wrap Text controls how nearby text behaves around that image.
Position settings let you set an image to sit at the center of the top of the page, for example, or to always be lined up on the right side of a column.
Text Wrapping settings controls how the text around your image relates to your image.
For best results, we suggest you ensure that the Text Wrapping for your figures be set to "In Line with Text", so that a figure is treated like just another word. After you've added a caption (which will then also be treated as text in your document), you can consider changing the text wrapping if you really need to.
This article from howtogeek.com does a great job of describing all the options.
The interplay between text wrapping and images has long been treacherous