Image > Image Size - Theres a Resolution (DPI) box towards the bottom.
Where are you getting the pictures from? If you scan them, you can set the resolution (DPI) when it gets scanned. Obviously, higher number = better quality.
The problem you are having is caused by a low DPI (dots per inch) or resolution. Most images taken from the internet are at 72dpi, however print quality images, depending on print size, may be 300dpi or more. 300dpi is the quality you most likely want for your yearbook.
Note: Changing the resolution (DPI) of the image will also change it's size. So make sure you change the size back after changing the DPI to the correct size before printing.