Here I have created Set Wallpaper in device method. In the below example I have created two activity and two layouts and added some function code in Android Manifest. Below example will described you how to set Wallpaper in device.

Step(1)-MainActivity-

public class MainActivity extends Activity {

    @Override
    protected void onCreate(Bundle savedInstanceState) {
        super.onCreate(savedInstanceState);
        setContentView(R.layout.activity_main);
        Button button =(Button) findViewById(R.id.button1);

        button.setOnClickListener(new View.OnClickListener() {

            @Override
            public void onClick(View v) {
                // TODO Auto-generated method stub
                startActivity(new Intent("com.example.backgroundapp.bakapp"));
            }
        });
    }

    @Override
    public boolean onCreateOptionsMenu(Menu menu) {
        // Inflate the menu; this adds items to the action bar if it is present.
        getMenuInflater().inflate(R.menu.main, menu);
        return true;
    }

}

Step(2)Create second Activity-

     public class bakapp extends Activity implements OnClickListener {
    ImageView display;
    int tophone;

    @Override
    protected void onCreate(Bundle savedInstanceState) {
        // TODO Auto-generated method stub
        super.onCreate(savedInstanceState);

        // to our activity to cover the whole screen
        requestWindowFeature(Window.FEATURE_NO_TITLE);
        getWindow().setFlags(WindowManager.LayoutParams.FLAG_FULLSCREEN,
                WindowManager.LayoutParams.FLAG_FULLSCREEN);

        setContentView(R.layout.back);
        Button but = (Button) findViewById(R.id.setwallpaper);
        tophone = R.drawable.image4;
        but.setOnClickListener(this);
        display = (ImageView) findViewById(R.id.ivdisplay);
        ImageView image1 = (ImageView) findViewById(R.id.IVimage1);
        ImageView image2 = (ImageView) findViewById(R.id.IVimage2);
        ImageView image3 = (ImageView) findViewById(R.id.IVimage3);
        ImageView image4 = (ImageView) findViewById(R.id.image4);
        ImageView image5 = (ImageView) findViewById(R.id.IVimage5);

        image1.setOnClickListener(this);
        image2.setOnClickListener(this);
        image3.setOnClickListener(this);
        image4.setOnClickListener(this);
        image5.setOnClickListener(this);

    }

    @Override
    public void onClick(View v) {
        // TODO Auto-generated method stub
        Toast var;
        switch (v.getId()) {
        case R.id.IVimage1:
            display.setImageResource(R.drawable.image4);
            var = Toast.makeText(bakapp.this, "image changed",
                    Toast.LENGTH_SHORT);

            var.show();

            tophone = R.drawable.image4;
            break;
        case R.id.IVimage2:
            display.setImageResource(R.drawable.image5);
            var = Toast.makeText(bakapp.this, "image changed",
                    Toast.LENGTH_SHORT);

            var.show();

            tophone = R.drawable.image5;
            break;
        case R.id.IVimage3:
            display.setImageResource(R.drawable.image6);
            var = Toast.makeText(bakapp.this, "image changed",
                    Toast.LENGTH_SHORT);

            var.show();

            tophone = R.drawable.image6;
            break;
        case R.id.image4:
            display.setImageResource(R.drawable.image7);
            var = Toast.makeText(bakapp.this, "image changed",
                    Toast.LENGTH_SHORT);

            var.show();

            tophone = R.drawable.image7;
            break;
        case R.id.IVimage5:
            display.setImageResource(R.drawable.image8);
            var = Toast.makeText(bakapp.this, "image changed",
                    Toast.LENGTH_SHORT);

            var.show();

            tophone = R.drawable.image8;
            break;
        case R.id.setwallpaper:
            // to set a background we need to use bitmap
            InputStream is = getResources().openRawResource(tophone);
            // to phone is a variable that is updated everytime we click on an
            // ImageView to that imageview resource and by clicking the button
            // we set the phone background to that image.
            Bitmap bm = BitmapFactory.decodeStream(is);
            // decode inputstream is
            try {
                getApplicationContext().setWallpaper(bm);
                // to set the wallpaper of the phone background we need to ask
                // permission from the user so add permission of background from
                // manifest file

            } catch (IOException e) {
                // TODO Auto-generated catch block
                e.printStackTrace();
            }
            var = Toast.makeText(bakapp.this, "Wallpaper image changed",
                    Toast.LENGTH_SHORT);

            var.show();

            break;
        }
    }

}

Step(3)-main.xml layout-

<RelativeLayout xmlns:android="http://schemas.android.com/apk/res/android"
    xmlns:tools="http://schemas.android.com/tools"
    android:layout_width="match_parent"
    android:layout_height="match_parent"
    android:paddingBottom="@dimen/activity_vertical_margin"
    android:paddingLeft="@dimen/activity_horizontal_margin"
    android:paddingRight="@dimen/activity_horizontal_margin"
    android:paddingTop="@dimen/activity_vertical_margin"
    tools:context=".MainActivity" >

    <TextView
        android:id="@+id/textView1"
        android:layout_width="wrap_content"
        android:layout_height="wrap_content"
        android:text="Application to Change background picture of device"
        android:textSize="30dp" />

    <Button
        android:id="@+id/button1"
        android:layout_width="fill_parent"
        android:layout_height="wrap_content"
        android:layout_alignParentBottom="true"
        android:layout_marginBottom="96dp"
        android:text="Click to launch" />

</RelativeLayout>

Step(4)-main2.xml.layout-

<?xml version="1.0" encoding="utf-8"?>
<LinearLayout xmlns:android="http://schemas.android.com/apk/res/android"
    android:layout_width="match_parent"
    android:layout_height="match_parent"
    android:orientation="vertical" >

    <ImageView
        android:id="@+id/ivdisplay"
        android:layout_width="200dp"
        android:layout_height="200dp"
        android:layout_gravity="center"
        android:src="@drawable/image4" />
"
    <Button
        android:id="@+id/setwallpaper"
        android:layout_width="fill_parent"
        android:layout_height="wrap_content"
        android:text="set image background" >
    </Button>

    <HorizontalScrollView
        android:layout_width="200dp"
        android:layout_height="wrap_content"
        android:layout_gravity="center" >

        <LinearLayout
            android:layout_width="fill_parent"
            android:layout_height="wrap_content" 
            android:orientation="horizontal">

            <ImageView
                android:id="@+id/IVimage1"
                android:layout_width="125dp"
                android:layout_height="125dp"
                android:padding="15dp"
                android:src="@drawable/image4" />

            <ImageView
                android:id="@+id/IVimage2"
                android:layout_width="125dp"
                android:layout_height="125dp"
                android:padding="15dp"
                android:src="@drawable/image5" />

            <ImageView
                android:id="@+id/IVimage3"
                android:layout_width="125dp"
                android:layout_height="125dp"
                android:padding="15dp"
                android:src="@drawable/image6" />

            <ImageView
                android:id="@+id/image4"
                android:layout_width="125dp"
                android:layout_height="125dp"
                android:padding="15dp"
                android:src="@drawable/image7" />

            <ImageView
                android:id="@+id/IVimage5"
                android:layout_width="125dp"
                android:layout_height="125dp"
                android:padding="15dp"
                android:src="@drawable/image8" />
        </LinearLayout>
    </HorizontalScrollView>

</LinearLayout>

Step(5)Android Manifest.xml-

<?xml version="1.0" encoding="utf-8"?>
<manifest xmlns:android="http://schemas.android.com/apk/res/android"
    package="com.example.backgroundapp"
    android:versionCode="1"
    android:versionName="1.0" >

    <uses-sdk
        android:minSdkVersion="8"
        android:targetSdkVersion="17" />
    <uses-permission android:name="android.permission.SET_WALLPAPER"/>

    <application
        android:allowBackup="true"
        android:icon="@drawable/ic_launcher"
        android:label="@string/app_name"
        android:theme="@style/AppTheme" >
        <activity
            android:name="com.example.backgroundapp.MainActivity"
            android:label="@string/app_name" >
            <intent-filter>
                <action android:name="android.intent.action.MAIN" />

                <category android:name="android.intent.category.LAUNCHER" />
            </intent-filter>
        </activity>
        <activity
            android:name="com.example.backgroundapp.bakapp"
            android:label="@string/app_name" 
            android:screenOrientation="portrait">
            <intent-filter>
                <action android:name="com.example.backgroundapp.bakapp" />

                <category android:name="android.intent.category.DEFAULT" />
            </intent-filter>
        </activity>
    </application>

</manifest>