Recent changes
Unfortunately, it appears that since the latest releases of Ubuntu (18.04 LTS), which uses Gnome as its core, the option to use a background image within the Terminal has been removed. Despite this, there are still some things users can do to change the Terminal.
Transparency
Thankfully, within the settings of the Terminal, users can customise the color and transparency of the window to their liking. Open the Terminal from the Applications menu or press Ctrl + Alt + T. From there, click on the small menu option that resides at the top and click Preferences.
Once you click, you will be presented with the Preferences window. Navigate down to the Profiles section where the default option of Unnamed will reside. Click this and you will see a window that has smaller tabs along it – Text, Colors, Scrolling and alike. Select the Colors option and untick the “Use Colors from System Theme” to activate the other options below.
Check the small tickbox and use the slider to set your preference for the Transparency. Selecting “full” will give maximum transparency as shown below.
Custom Wallpaper
If you really want a transparent custom Terminal within your Linux system, then you can use an alternative. I would recommend installing the Terminal from Xubuntu which has a little more flexibility. Within the Terminal type the following: Once you have typed “Y” to allow this, it will install and can be found within the Applications menu. As it opens, navigate to the Preferences again by clicking Edit, and you will be presented with the options. This window looks slightly different but still has all the elements that are needed to create a new look for your Terminal window. Navigate to the Appearance tab just as before where you set the transparency, and you will see a new “Background” option. On this dropdown there is the option for a Solid Colour, Transparency and the element we want – Background Image. Selecting this gives the following option.
Click within the File bar that is highlighted, and your file manager will open, allowing you to select whichever image you want to use, along with whether it is tiled or full screen.
Once you have selected your image and tested the settings, you can achieve something similar to the above. In addition, there appears to be another method of changing the background wallpaper on a Terminal. Within the Ubuntu Manpage, I came across this link. It reports that it will “manage the terminal background by creating a picture that is behind the text, replacing the normal background color.” By the look of the information, this is done with a Perl script. Whilst it seems to be a possible solution, it does appear to be a longer, more in-depth method than simply installing the XCFE Terminal.