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.
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.
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.
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