All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.
Pictures are of two kinds:
1. Pictures made of rough material of things that have shadows, such as statues of living beings (humans or animals), are forbidden and there is no disagreement among Muslim scholars over this issue.
2. As for pictures without shadow such as paintings on walls, prints on clothes etc., the Muslim scholars differ over this issue. The preponderant opinion is that hanging them is forbidden for the Ahadeeth which establish the prohibition of making pictures are general; i.e., they do not make a distinction between the different kinds of pictures. Imam Muslim narrated that ‘Aa'ishah said: The Prophet entered (my apartment) and I had hung (on the door of my apartment) a thin curtain having pictures on it. The color of his face underwent a change. He then took hold of that curtain, tore it, and then said: “The most grievous torment for the people on the Day of Resurrection would be for those who try to imitate Allah in the act of creation.” Imam An-Nawawi said: "The scholars of the Shaafi’i School of jurisprudence and other scholars strictly forbade making pictures as this act is among the grave sins because the person who draws pictures is threatened to have a serious punishment inflicted on him on the Day of Resurrection as mentioned in sound Ahadeeth. This ruling concerns the one who makes pictures. As for hanging pictures, Imam An-Nawawi said: “Keeping the pictures of living souls on a cloth, turban or keeping them hanging on a wall is forbidden if they are not despised, but if they are despised such as in a carpet, a pillow, or a cushion which are trampled under the feet, then they are not forbidden. Though using the humiliated images is permissible but angels of mercy do not enter a house where there are pictures. There is no difference in this ruling between the pictures, which have shadows and pictures which are shadowless. This is the opinion of the companions of the Prophet their successors and the Muslim scholars.” Imam An-Nawawi also said: "Saying that the pictures which have a shadow are prohibited and those which have no shadow are permissible is null and of no legal base. The Prophet disapproved the curtain having pictures on it. He dispraised it only for its pictures which actually did not have any shadow. In addition to many Ahadeeth prohibiting making pictures in general, the Muslim scholars are unanimously agreed on the prohibition of the pictures that have a shadow, just as they are agreed upon destroying such pictures. But they permitted the toys of small girls."
On the other hand, hanging pictures of non-living things, such as pictures of trees, mountains, and rivers, etc., is permissible.
Please refer to the explanation of verses 13: chapter 34 in Tafseer Al-Qurtubi; it is good and useful.
For more benefit on making images, please refer to Fataawa 88456, 4549, 63235, 89555 and 88306.
For more benefit on hanging pictures, please refer to Fataawa 82040, 83193 and 269941.
Allah knows best.