Open Tools menu and click on Options... .

Make sure that General Settings is highlighted on left side. On the bigger right part of window, click on Change your picture. It is under Other things you can do.

New window will open. Click on Browse... to navigate for your photo on your computer. If you have a webcam, click Take a picture. Then you can adjust zoom for selected picture or move it with your mouse. If you're happy with your picture, click on Use this picture. Close Skype - Options window by clicking on Save button.