Instructions:
To embed data in an image file:

$ ./encode.py datafile image_in.png image_out.png

This will embed datafile in image_in.png and write the result to image_out.png
To debed (?) data in an image:

$ ./decode.py image.png datafile

This will decode the data previously hidden in image.png and write it to
datafile.

Written for Python 2.6. Requires Python Imaging Library. 
Not tested for image formats other than PNG (not tested very much at all, tbh).
Any kind of data should be okay.
Will probably not work for formats with lossy compression.

This is not an encryption. It is merely hiding the data in plain sight.