A couple months ago I changed this photo (see original at end of post) to black and white then printed it on a Printed Treasures Inkjet Printable Fabric sheet and then embroidered the gnome. If you type in "embroidered photo" to Pinterest you'll see all the inspiration I saw. Some cool stuff there!
If you don't have the printable fabric sheets it is possible to do it another way (probably many ways).
I also printed a photo on bleached muslin by cutting a piece of bleached muslin a little smaller than an 8.5x11 printer paper. I then cut a piece of freezer paper 8.5x11 and ironed it to the muslin. I fed it through the printed and printed a black and white photo on it. It came out really really good! The freezer paper is to keep it stiff..you're not actually printing on the freezer paper.
The photo is a little blurry but I loved it so much I didn't care. I have another one of the girls at this same spot from the year before that I want to embroider as well. Ava is also making a face in it!
the original below.