How do I render a background image as a sky in blender 2.7x I followed a blender 2.5 tutorial for rendering a background image as a sky. It does not work in blender 2.7.

Tutorial link: http://vimeo.com/18689703

Here are a couple of pictures of what happens.



The sky appears around the rendered scene instead of appearing as an actual sky inside the rendered scene.



The rendered image's sky only appears as the gray shaded sky. The image of the sky that I tried to add does not appear as if it is a real sky in the rendered scene.

I want the sky to appear like this:


Sky inside the rendered scene instead of around it.
For Blender Render you set the transparency in the shading panel.