You can adjust how the text wraps around the picture.
- If the picture or object is on a drawing canvas, select the canvas. If the picture or object is not on a drawing canvas, select the picture or object.
- On the Format tab, in the Arrange group, click Position.
If the Arrange group is collapsed and Position isn't visible, click the Arrange button, and then click Position. - Click the wrapping position that you want to apply.
More info here: Wrap text in Word 2007