The 'Scale picture' option
The 'Design' dialogs all have a check box labelled 'Scale picture to frame size'.
If you select this check box then your picture's size will be adjusted (increased or reduced) to make a 'best fit' to the available display frame, without altering the picture's original proportions. The frame's area is:-
210 pixels high x 210 pixels wide if a caption is included
280 pixels high x 210 pixels wide if a caption is not included
If you do not select the 'Scale' option and your picture is not too large for the frame, it will be displayed unchanged. If it is too large, it will be clipped to fit.
Try various settings with the Preview button to find out what looks best.