@Grunt0300 was right. When you go to Settings, and then "Wallpaper," you have the option to choose a wallpaper for your lock screen AND your home screen. That is, without having to jailbreak.
However, I think I know what the problem is. Wallpaper on the home screen (not the lock screen) is only available on iOS 4. Also, you need to have an iPhone 3GS or an iPhone 4 in order to set wallpaper for your home screen. If you have an iPhone 3G (or the original iPhone), you won't be able to use this feature. While the iPhone 3G is capable of upgrading to iOS 4, Apple didn't include the wallpaper feature in the upgrade (I guess Apple discovered that the phone's hardware wasn't able to run as they expect with wallpaper 'behind the icons.').
I hope this helps you out...