Look at the illustration, below. The image is bigger than the frame -- you can only see part of it. If you click on that image with the Selection Tool you will see a blue bounding box which is the bounding box of the image's Rectangular frame. If you click on the same image with the Direct Selection Tool, instead of selecting the frame that contains the picture, you are selecting the picture inside the frame and you will see an orange bounding box, which is the bounding box of the image itself.
- Change the size of the picture frame by dragging the blue handles of its bounding box with the Selection Tool
- Change the size of the picture itself, by dragging the orange handles of the picture with the Direct Selection Tool.
If you want to keep the original proportions, hold down shift as you do either of the above.