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This button is listed in the sidebar on the left and will open the wallpaper options. You will be taken to the 'Choose' page where you can select between Apple wallpapers and pictures stored in your Photos app. You can reach this same interface by launching the "Photos" app, tapping a photo to view, opening the "Share" menu in the upper right, and tapping "Use as Wallpaper". You can also pinch or reverse pinch to zoom in and out. The bottom bar lists a number of options on how to use your photo as your wallpaper. Tapping the first 3 will set your photo as a wallpaper. "Set Lock Screen": This option will set the photo as your wallpaper only when the device is locked. "Set Home Screen": This option will set the photo as your wallpaper only when your device is unlocked at the home screen. "Set Both". This option will set the photo as you wallpaper on both your lock and home screen. "Perspective Zoom On/Off". When on, this will automatically adjust your photo to fit the screen so that the photo scrolls slightly as you tilt your device. "Cancel": This will return you to your previous location without setting the wallpaper.
Open the "Settings" app. Tap "Wallpaper". Tap "Choose a New Wallpaper". Tap a picture to preview it as a wallpaper. Tap and drag the picture to adjust its positioning. Choose your wallpaper settings.