And then change the Surface properties to show by Material (or was it Surface Color - without checking I cannot remember) to make the image show up draped on the surface. This applies to Images and PDF Pages (draping a PDF Page is a great QA tool if you have never tried it).
Select the Image in Project Explorer / Imported Files, use Add / Remove Surface Members as Karen suggested, and select the surface - easy process and great results. It uses whatever image resolution you have. The image will be auto cropped to the surface extents in this process.
If you don't have an Image you can load the Background Map Service and select Satellite View and then do a Capture Image command from the Background Map Service - while lower res - it is also a way to get an image if you don't have one for the Project.
Alan