This is how I learned most of blender in one night.
Version 2.49 I frown upon thee. If this guy is using the superior 2.5 that video is completely useless to him. The interface is completely different but less confusing and much more user friendly.
I have 2.5, but one of the reasons I don't really use it is because I can't setup any background images.If I can figure that out, I'll switch.
Move your mouse over the 3D view, press N on your keyboard and check "Background Images" and click "Add Image". After that's it's pretty straight forward.