1. Get into your Outlook Inbox. Go to Tools-->Options and click the Mail Format tab. Make sure Use Microsoft Word to edit e-mail messages is checked. Then click OK.

2. Open a new Word document. Go to Tools-->Options--> and click the General tab.

3. Click the e-mail Options button at the bottom right. Type a name for your signature and the text and click OK to save. The next time you open a new e-mail message your signature will appear.

My advice - create a short, simple signature. No colors, strange fonts, or graphics. There are still too many e-mail clients out there who will not be able to read your signature if you embellish too much.