To "create" you can write a book, get an image editor and try making some. Specific questions are better......
GIMP is free.
You would apply background image to nearly any HTML element using CSS, there is tutorial here for background and the variants:
CSS background property
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(1) Can I use any size image or should my image meet certain minimal specs
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You're going to use what ever meets your needs.
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(2) What format should the image be (PNG, JPG, GIF, SVG) or does it matter
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What image format to use really depends on the content of the image. Simple images without a lot of color lend themselves to .gif. Photo type images work best with .jpg.
.png can do either well but it has larger file sizes generally especially for photo type images. One big advantage it does have is alpha transparency.
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(3) Is there a certain code that will make the background image fit all screens. Basically, I don't want any unneccessary horizontal or vertical scrolling
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Background images will not cause scroll bars, only content does. It's possible to stretch images, search for fluid background image. Generally you want use it's native size. Browsers do not do a very good of on the fly scaling. There is tricks for this though, for example you can repeat an image.