You can either choose one of the 3 default choices (blur, home, coffeeshop) or you can upload a custom background image.
To upload a custom background image click on the camera icon, then the plus (+) button.
You will then be able to select a background image to upload from your computer. The selected image will show up in the first position on the left in the list of available backgrounds to use.
To delete a custom background, click the X in the upper right-hand corner of the image and it will be removed from your background selections.