For explanation of commands, nothing better than "help function_name". Algorithm is simple and described in my previous comment. Regarding GUI making, you need to go through GUI tutorial, lots around here on File-exchange and outside as well.
As said in the requirements, it needs larger source image for embedding smaller images. So if you are trying to use a small image as source image, it will throw error. Roughly the size of the image to be embedded inside the source image should be less than 1/8th of the source image.
Theory is quite simple: Every 8 pixels of source image are altered for each pixel of image to be embedded and that’s why that 1/8th requirement.
I dowloaded your program and was playing around with it. I took the image that you provided 'pano.jpg' and tried embedding it with a different image. I used a new image which was of size 480x640. The extraction algorithm was successful in extracting the embedded image but when I tried using this image as the source image and tried embedding it with one of the images that you provided I was getting an error message saying
Too Many Images or Too Big Image for Hiding [Used 341.7648 percent of the source image].
Your algorithms look simple and pretty straightforward. Is there any literature out there expliaing how you implemented this. I would like to know the idea behind the actual code.
Thanks and I appreciate your work.
30 Dec 2009
Just changed the screenshot and description, code remains same.
31 Dec 2009
Now it saves in png format that reduces file size over the previous bmp format.