distorting and un-distorting images when uploading and displaying using PHP
You can encrypt the images after they've been uploaded, and decrypt them again just when a user requests them. That's going to be CPU-intensive if you serve a lot of images, but if you want to ensure your images can't be read by third parties who may have gotten access to your server's hard disk, encryption is the way to go.
Of course, if that's what you want to prevent, you should not store the decryption key on your server! So you'd need to implement some sort of public-private key system, where the users themselves hold the decryption key for their images.
For maximum security, you could also consider using an SSL connection for uploads and downloads.