I just started using this software I found VIA Lifehacker called John's Background Switcher. It's INCREDIBLE. You can choose from different modes starting with making a list of images from your hard drive, to adding a folder with sub-folder searching also. Now for the fun part. You can add Flickr, and not only that, but configure it to grab the random top images from EVERYONE, so that you never know what is going to be your background. You can enter keywords or text descriptions words to filter what you get. There are other services as well, Phanfare, Smugmug, and Picasa, which I haven't tried as yet since I don't use those services. If they work like the rest of the program they will be perfect. Here is another kicker. You can use Yahoo and specify some search terms to pull images to make your background! UNLIMITED RANDOMNESS!
There are many display modes, stretch to screen, scale to fit, center, 4 picture mosaic, thumbnail mosaic, and snapshot scrapbook which places photos in random places on your desktop! This mode also includes using an image with special effects as your background image behind the photos.
There is so much here that is configurable it is impossible for my aching hands to type it all. Quite simply this is one of the best pieces of free software I have ever downloaded! If you like it, be sure to donate to the author, I did!