This FAQ is being rewritten to include newer info.
note : This FAQ is about adding images to aid you with modeling tasks and not adding visible images in the environment that show up in renders.
Loading Backdrop Images
There are two ways to add a backdrop image to your viewports.
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By drag and dropping an image to your viewport. (note: in 20x versions of modo, dragging and dropping an image, adds a backdrop item instead)
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By clicking the second Viewport popup and choosing Backdrop -> Load Image (or pick an image you have already loaded)

Adjusting Backdrop Images
To adjust the backdrop images you can use the Adjust Backdrop Image tool, which is located at View -> Adjust Viewport Image, and then clicking on the viewport whose Backdrop Image you want to adjust. The Backdrop Image settings are independent for each viewport.
The Adjust Backdrop Image has a number of options and properties (found in the Tool Properties when you have the tool active).
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Saving Your Backdrop Image Settings
It should be noted that the Backdrop Image settings are not saved with the model data when you save your work. To save your Backdrop settings so that you can reuse them later, there are two options.
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You can go to Layout -> Save As... and save the whole layout settings along with the backdrops.
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You can click the arrow of the top right corner of each viewport and go to Viewport Controls -> Save Viewport As... This will save a new kind of viewport that you just created that you can reuse anywhere you want. You have to do this for each viewport that has backdrop settings you want to keep.
New in 20x: The Backdrop Item
In later versions of modo, the backdrop item was introduced. The main difference with the backdrop image (which is still available) is that the backdrop item is saved within the lxo file (not the image itself, just the reference to it and the settings) so you don't have to use the workarounds mentioned above. In that aspect the Backdrop Item is superior to the Backdrop Image, but it is missing any image manipulation capabilities (the brightness/contrast/transparency settings).
To add a background item, you can simply drag and drop an image in a viewport, or you can use the new item drop down list found in the item list and select "Backdrop Item". You can add multiple Backdrop Items in a scene.