Steam always shows "in-game"

Wallpaper Engine is only supposed to show on Steam while accessing Workshop features (when the browser or editor is open, this is enforced by Valve / Steam). But if it shows up even after closing all windows, you are either experiencing a known Steam bug, that you can avoid with the fix below, or the window did not close properly (check for ui32.exe in task manager).

If you regularly have this problem you can get around this by not launching the program through Steam but directly from the wallpaper_engine installation directory. By default this would be C:\Program Files (x86)\Steam\steamapps\common\wallpaper_engine\wallpaper32.exe. If Wallpaper Engine is running already, completely turn it off first and then re-run it from this directory and possibly turn the autostart off and back on in the Wallpaper Engine settings.

Every time Steam reconnects to the internet, due to your internet turning off and on, Steam may go a little crazy when it comes to your in-game status which can cause issues like that. As mentioned above, start the program directly or via the autostart functionality and not through Steam, this will likely prevent the issue from happening for you.

Completely disable Workshop / Steam integration

You can disable the entire Steam integration by creating an empty text file named nosteam.txt and putting it into the wallpaper_engine/bin directory (by default the complete path is C:\Program Files (x86)\Steam\steamapps\common\wallpaper_engine\bin). You cannot download/update or upload any wallpapers if this is disabled, but you can still access everything that was previously downloaded.