The Background layer can be used to change what gets displayed behind your original image. Note that the background will only be visible if your project has transparent pixels (ex: deleting a selection, or using the Color Removal layer), or if you've increased the background size (see below).
There are three types of backgrounds you can choose from:
You can also change the size of the background by checking Change Background Size. When this is checked, you can use the width and height controls to adjust the background size, or the resize widget over the image to adjust the size and position of the background. Once you're done using the resize widget, click Apply Size.
The Alignment buttons are used to align the original image to the background. So for example, if you want your original image to be centered in the background, click the horizontal center alignment and vertical center alignment buttons.