How to hide an image inside another image?

At first glance, there's nothing special on below image..

..but in fact, on this picture is hidden another one:

It was done, by using steganography, the second image was stored on two lowest bits of the pixels. On two bits we may save values from 0 to 7, pixel in the image may have values from 0 to 255, so such small change is not visible to the human eye.

I used this python script:

#!/usr/bin/env python
import sys
import Image, ImageOps

def extract_image(from_image, s=4):
    data = Image.open(from_image) 
    for x in range(data.size[0]):
        for y in range(data.size[1]):
            p = data.getpixel((x, y))
            red   = (p[0] % s) * 255 / s
            green = (p[1] % s) * 255 / s
            blue  = (p[2] % s) * 255 / s
            data.putpixel((x, y), (red, green, blue))
    return data

def hide_image(public_img, secret_img, s=4):
    data = Image.open(public_img)
    key =  ImageOps.autocontrast(Image.open(secret_img))
    for x in range(data.size[0]):
        for y in range(data.size[1]):
            p = data.getpixel((x, y))
            q = key.getpixel((x, y))
            red   = p[0] - (p[0] % s) + (s * q[0] / 255)
            green = p[1] - (p[1] % s) + (s * q[1] / 255)
            blue  = p[2] - (p[2] % s) + (s * q[2] / 255)
            data.putpixel((x, y), (red, green, blue))
    return data

def show_help():
        print "wrong usage, try:"
        print "%s show from.jpg" % sys.argv[0]
        print "%s hide public.jpg secret.jpg" % sys.argv[0]

if __name__=="__main__":

    if len(sys.argv) != 3 and len(sys.argv) != 4:
       show_help()

    elif sys.argv[1] == "show":
        print "image will be saved as extracted.png"
        extract_image(sys.argv[2]).save("extracted.png");

    elif sys.argv[1] == "hide":
        hide_image(sys.argv[2], sys.argv[3]).save("hidden.png")

    else:
        show_help()

Below is example of usage, first line shows how to hide image, second shows how to extract image.

bash-3.2$ ./hider.py hide kosciol_Marii_Magdaleny.jpg GOR-Rabka.JPG  
bash-3.2$ ./hider.py show hidden.png