I read somwhere that if you put a bucket or some other container over the head of a NPC you can steal from them without being caught. My question is how do you put the bucket on the head of the NPC when you can't equip it?

Pretty easy actually:

http://media.officialplaystationmagazine.co.uk/files/2011/11/Skyrim-Stealing-PS3-610x344.jpg

"Pick up" the object you want to put over the person's head, like a large basket or bucket. It must be something that you can pull into your inventory, but don't. Just hold the "activate" button you'd normally use to pick something up into your inventory, but press and hold. You should be able to "pick it up" and move it around. Just get it to flip over and slide it over someone's head and presto, you can rob them blind. (Pun intended.)

Thanks for the help!

No problem, here is a video I found of exactly how to do it:

http://www.youtube.com/watch?v=GDgqoBJOJR8

The person in the video seems to have some trouble with getting the items lined up correctly. Grabbing them near the bottom should cause them to flip over so it's easier to put them on to someone's head.