Sorry, i'm new to bikes and recently purchase one from craighslist. I am attempting to do any and all fixes in my ability. I noticed the back wheel is not as fluent as the front wheel. For example, if i lift the bike and spin the wheels, the front has A LOT less friction than the back.

Another possible issue (see image), the back wheel does not seem to be bolted in all the way. Is it correct in the image or should i bolt it in all the way?

The wheel seems to be correctly installed. As a rule, unless the drag is very apparent, a rear wheel will not spin as freely as a front since the drag from the freewheel or freehub body (freewheel in your case) will slow it down faster. Your experience is probably typical.

It could also have to do with the tightness of the nuts there. When my bike with horizontal/near horizontal dropouts was having problems with tire rub, I was informed that you have to make sure you tighten those nuts down all the way because they have a tendency of slipping. The friction could be from the wheel being loose enough to rub on the brake pads or frame.

Looks like you're missing the washer under the nut. There should be a fairly large washer between the nut and the frame to give better contact. The washers are often serrated on one side for better grip to prevent the wheel from slipping, but that's more important on the drive side.

i figured out what the issue was with the back wheel, the bearings were too tightly packed. I loosen the cone and nut, spins like a charm.

A newbie with mechanical skills! Good job!

May want to get a cone wrench or two and take out the bearings and clean/regrease all the relevent areas then adjust.
Good practice for a beginner--start on the front wheel.