To set a background behind a photo in Adobe Photoshop 7.0, first open your photo and unlock the layer by double-clicking on the “Background” layer in the Layers palette. Next, go to File > New to create a new background (choose your preferred size and background color). Then, drag the photo layer onto the new background using the Move Tool (V). Adjust the position and size of the photo as needed with Edit > Free Transform (Ctrl+T). You can now add effects or blend the photo with the background using layer styles or the Eraser Tool for a smoother integration.