Image-making is of two types: one by hand and the other by means of machines.
Image-making by hand is haraam, and is in fact a major sin, because the Prophet (peace and blessings of Allaah be upon him) cursed the one who does it. He did not differentiate between images that have a shadow (i.e., three-dimensional) or those that are simply drawn (two-dimensional), according to the more correct scholarly opinion, because of the general meaning of the hadeeth.
With regard to image-making by means of machines, i.e. cameras, there is a difference of opinion among the later scholars on this matter. Some of them forbid it and some of them allow it.
In order to be on the safe side, it is better to avoid that, because it is one of the doubtful areas. And whoever is careful with regard to doubtful matters will protect his religious commitment and his honour. But if he needs to do that for a specific purpose such as proving his identity, there is nothing wrong with that because if there is a need, the matter is no longer doubtful.
With regard to keeping pictures, this is also of two types:
The first type is keeping images that are three-dimensional. Keeping them is haraam. Ibn al-‘Arabi narrated that there is consensus on this point. See Fath al-Baari, p. 388, vol. 10). He said: This consensus has to do with things other than girls’ dolls.
It was narrated that ‘Aa’ishah (may Allaah be pleased with her) said: “I used to play with dolls in the presence of the Prophet (peace and blessings of Allaah be upon him) and I had friends who would play with me. When the Messenger of Allaah (peace and blessings of Allaah be upon him) entered they would hide themselves and he would call them to come and play with me. Narrated by al-Bukhaari, no. 5779; Muslim, no. 2440.
The second type is images that are not three-dimensional. These are of different types:
1-Those that are hung up to be venerated and respected, as in the case of pictures of kings, presidents, ministers, scholars etc. This is haraam because it involves exaggeration about a created being.
2-Those that are hung up for the sake of memory, such as hanging up pictures of one's friends. This is also haraam, because of the hadeeth narrated in Saheeh al-Bukhaari from Abu Talhah (may Allaah be pleased with him), who said: “I heard the Prophet (peace and blessings of Allaah be upon him) say: ‘The angels do not enter any house in which there is a dog or an image.’” Narrated by Muslim, no. 2104).
3-Those that are hung up for the purpose of adornment. These are also haraam because of the hadeeth of ‘Aa’ishah who said: “The Messenger of Allaah (peace and blessings of Allaah be upon him) came back from a journey and I had hung a patterned curtain on which there were images over (the door of) a room of mine. When the Messenger of Allaah (peace and blessings of Allaah be upon him) saw it, he tore it and said, ‘The most severely punished of the people on the Day of Resurrection will be those who tried to imitate the creation of Allaah.’” She said: “So I made it into one or two cushions.” Narrated by al-Bukhaari, no. 5610; Muslim, no. 2107.
4-Those that are treated with disrespect, such as images in carpets and pillows. Al-Nawawi narrated from the majority of scholars among the Sahaabah and Taabi’een that these are permissible.
5-Those that have unfortunately become widespread and are difficult to avoid, such as images engraved on coins etc which have become a problem for the Muslim ummah. It seems to me that there is no sin on the one who acquires these without wanting to acquire images.
With regard to dolls that children play with:
An exception is made in the case of children’s toys, which are not regarded as haraam or makrooh. But what are the toys which are exempted? We know that the toys of the past did not have eyes and lips and noses as they do nowadays. I think it is better to avoid these toys and limit oneself to those the kind of toys that were known previously.
See Fataawa al-‘Aqeedah by Shaykh Ibn ‘Uthaymeen, p. 66, 663, 679
And Allaah knows best.