The size of and intricacy of your pattern will determine what technique is best to use.
Technically, you can "insert" a picture just by changing the stitch, without changing your yarn/color. i.e. garter stitch image on a stockinette background or vice-versa.
For pictures with large blocks/changes of color, intarsia is best.
For pictures with small ares of color (i.e. frequent color changes) fair-isle/stranded knitting is best.
You don't need to border/outline an image unless it creates the look you want.