hi trojwl, and welcome to sevenforums,
check your 'picture position' settings. right-click desktop >> personalise >> desktop background
yours seems to be set to 'fill' or 'stretch', which will make the picture fill the screen.
it depends on the shape of your desktop, and the image too - imagine trying to fill a rectangle desktop with a square picture. you're either going to have to chop things off (fill), have black bars (fit), stretch and distort the square into a rectangle etc etc