It is true the third commandment prohibited the creation of all images for the Israelites. The Hebrew word pesel is translated as graven images, but in its usage it includes all images whether engraved (carved) or molten (cast, as in a bronze sculpture). Jewish law interpreted this to include such items as coins with images on them (like Caesar) and so on. Indeed, the early church got into a fuss about this and some church leaders interpreted the commandment to include paintings and all statuary. Neither side won in this controversy and the church split, with Rome allowing statues and all works of art and Constantinople allowing only pictures.
But wait, didn't Moses break the law shortly after it was instituted? Didn't Israel break the law regularly too?
Well, the truth is, yes, it does seem Moses was a bit lax on the literal translation of the commandment of not make graven images. On the other hand, it was God who told him to do so. In Numbers 21 we read, "And the LORD said to Moses, 'Make a serpent, and set it on a pole.'. . . So Moses made a serpent of bronze, and put it upon a pole" (Numbers 21.8-9). And of course there was the Ark of the Covenant. Atop of it were two golden cherubim. Clearly these are contradictory to the fourth commandment which reads "You shall not make for yourself any graven images, whether in the form of anything that is in heaven above, or that is on the earth beneath, or that is in the water under the earth" (Exodus 20.4). The bronze serpent was in the image of a creature on earth and the cherubim were of the heavens above. It does seem the commandment was violated in short order.
As mentioned above, the priests later took this commandment very seriously and banned images of all types from the Israelite cult. However, their ban didn't stop others from creating images. During the reign of King Jeroboam molten images were placed in the sanctuaries at Bethel and Dan as images of Yahweh. These statues were molded into the shapes of calves and placed in the sanctuaries to remind the worshipers of God (1 Kings 12.28-29).
But the prophet Hosea protested loudly against these images and many scholars believe this was the first time the anti-image command was enforced in Israel. Indeed, some have suggested the fourth commandment was actually added to scripture during this period, especially since other images obviously had been created and there had been no brouhaha.
And yet, perhaps the fourth commandment has been too harshly interpreted. Perhaps, like many of the commandments, we need to better understand what the law intended, rather than to insist on a literal interpretation.
Why would God not want the creation of molten images? Two reasons come to mind. One is obviously to prohibit idolatry. The other is to thwart the notion that God can be conceptualized physically. Paul wrote, "They exchanged the glory of the immortal God for images resembling a mortal human being or birds or four-footed animals or reptiles" (Romans 1.23). God can't be contained by images, just like God can't be compared literally to anything. God is too "big," too "different," and too "other" for us to do so.
So, if the command against images of God is meant to foil the attempts at conceptualizing God, then the command wasn't against all statues, all images, or all pictures. Instead the command would be against images representative of God.
So who's that knocking on the door in that picture up front in the church?