The Mosaic layer produces a mosaic image to be positioned on the canvas. A new mosaic layer can be created by clicking the Mosaic icon inside of the Tools dropdown in the Effects tab of the toolbar.
PhotoPad's mosaic layer creates an image from a template image (the active image on the canvas) and a tile collection.

Mosaic Image Properties
Tile Image Source Folder
Click the small browse button to specify a folder containing as many images as you can find. These images will be combined to remake your template image.
Tile Columns and Rows
Tile Columns and Tile Rows specify the tile size of your mosaic by the appropriate number of divisions. More mosaic tile divisions will closer approximate your template image, where as less will retain more detail in the tiles.
Layout Mosaic Tiles
Click this button to instruct PhotoPad to lay out a mosaic with the supplied properties. If any of the supplied properties change after laying out the mosaic, you can click this button again to update your mosaic.