In the Desktop & Screen Saver pane of System Preferences, you can select a folder of images or an iPhoto album to display desktop pictures that automatically change at a specified interval, like a slideshow. To enable the feature, just select a source in the pane and then select the "Change picture" checkbox.
While this feature works for iPhoto albums created in iPhoto 4, the "Change picture" checkbox and corresponding pop-up menu become unavailable (dim) when you select an iPhoto album that was created in iPhoto 5 or later. This occurs due to a change in the structure of iPhoto libraries.
As a workaround, you can set your desktop pictures directly in iPhoto instead of in System Preferences:Note: Sometimes the desktop will "stick" on the previously selected group of images. If this happens, select a background from the Apple Images list in System Preferences, then repeat the steps above. If that still doesn't work, select a background from Apple Images, log out, then repeat the steps above again.
This document will be updated as more information becomes available.