To me personally, "in God's image" denotes value. We're valuable to God as something very special in all of His creation. That's why Jesus (i.e. God Himself) had to come and pay the price for us because nothing else in the universe reflects our value to Him, except Himself.
Image also means reflection or rendering. Another word for "image" in Biblical context is "likeness."
We are "like" God in many ways. We can make moral decisions. We can discern good and evil. We can be carriers of His love and compassion and executors of His will according to His character. We obviously cannot "be" God because only God can be God, but we can be "like Him."
Contrasted against such capacity obviously makes sin, which is conduct in opposition to God's nature, that much more deplorable, and makes evil truly evil. God doesn't define things on a curve nor grade them on a curve. He defines things according to Himself as the standard, and that is how we must learn to see them also, or there cannot be any clear definition of anything.
Even so, come Lord Jesus!