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The Healing Brush Tool was new for photoshop 7, so there were still features to be added like the Use All Layers option which came in photoshop cs (photoshop version 8). You can duplicate your layer (Ctrl+J) and work on that layer.
So the answer is in photoshop 7 you have to use the Healing Brush Tool on the image layer.
Unfortunately, photoshop 7 (circa 2002) is old in computer software terms, so most of the instructions for photoshop you see will be for much newer versions that have features that photoshop 7 doesn't have.
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Jeff Arola is correct. But you can make a duplicate layer and work on that layer. This way you have the original untouched.
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But when I try to apply on the original layer it says it is lock.
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Duplicate the original layer by dragging the original layer to the Create New Layer icon at the bottom of the layers panel.
Then try the Healing Brush Tool on the Background copy.