Just to complete the process (since maybe
deepdown doesn't know how to use CAP):
Once you load the picture in as
MGSFan612 stated, your picture is now a "Stamp". It will appear as a tiny thumbnail in the stamps area as show in this picture. (I just used my avatar picture for simplicity.
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Click on the stamp, and drag it onto the canvas just above the stamps. You will then have to position it and resize it to your liking.
NOTE: The canvas is 256x256. To center a picture on it, you will want to set the X and Y at 128 (both values). In the below picture I resized it to fill the canvas and centered. (My picture happened to be square). For use on furniture, I find it is best to offset the pictures rather than center them. I do 112 x 112. But play with it, that is what the preview is for.
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It is important to note that CAP is
not a photo editing program. Whatever your picture was when you imported it, is how it will be (other than size/position). Also, it will not be transparent. Otherstamps will obsure it and it will obscure other stamps. It will not be seamless, unless the picture was seamless to start with.
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Once you get it to your liking. Save your pattern (the ellipsis button gets you to the menu).
To export it and get it into your game / upload it to the exchange, you should read the very nice tutorial that has already been posted:
http://forum.thesims3.com/jforum/posts/list/236007.page