How to change folder background in Windows XP and Vista

Windows 98 comes with a utility named Customize Folder Wizard (ieshwiz.exe) using which you can customize folders easily. The Customize Folder Wizard automates the Desktop.ini and Folder.htt editing process. This utility works fine in Windows XP as well.
For Windows Vista, see note at the end of this article.

Windows XP

Download ieshwiz.zip and save it to the Desktop
Extract ieshwiz.exe to the C:\Windows\System32 folder
Open a Command Prompt window (cmd.exe) and type:

IESHWIZ

For example, to customize the folder D:\Tools, replace placeholder with D:\Tools
Select the background image for that folder, and click Next
Close and re-open the folder.
Note that the text color in a folder can be customized using the wizard. All of the these settings are stored in a file named Desktop.ini within that folder.

The changes are stored in the desktop.ini file. Here are the sample contents:

[ExtShellFolderViews]
{BE098140-A513-11D0-A3A4-00C04FD706EC}={BE098140-A513-11D0-A3A4-00C04FD706EC}
[{BE098140-A513-11D0-A3A4-00C04FD706EC}]
Attributes=1
IconArea_Image=C:\WINDOWS\winnt.bmp
[.ShellClassInfo]
ConfirmFileOp=0

For more information on Desktop.ini files, see MSDN article Customizing Folders with Desktop.ini.
Windows Vista
In Windows Vista, you can't use any image as folder background. But there is a small utility which allows you to set any wallpaper as background image in folders.
Thanks to Andreas for creating "Vista Folder Background". It integrates itself in Explorer and adds a new tab "Folder Background" in Folder Customization dialog box.

Download Here