Click on the Magnifying Glass icon in the Unknown Materials to do a search for other materials. (Just type “walnut” for instance to pull up a list of all the walnut and walnut plywood options. Click on one to select it.)
If your image consists of pixels (bitmap image) the only option you have is to Engrave it. Cutting lines are created with vector paths, and you usually have to create those in one of the drawing programs like Inkscape or Illustrator, or through using the Trace Function in the Glowforge interface.
There are a few tutorials that can help you to get started with adding cutlines…here are a few that you should work through to get a better understanding of how it works.
First you will want to learn how to use the Glowforge interface…so reading through (and working through) the suggested examples are important steps for learning to use the machine:
Print a Gift of Good Measure.
Print a Snap-n-Store Box with Customization
Make a Gift Tag
Shortcut Keys
Working with Manual Settings
And the tutorial below expands on using the Trace function in the Glowforge: