how to set a password to an image file C#

Try following code to make password and checking:
// 1) Making Password

using System.Security.Cryptography;
static class CommonMethods
{
public static string MD5Hash(string str)
        {
            MD5CryptoServiceProvider md5 = new MD5CryptoServiceProvider();
            byte[] data = System.Text.Encoding.ASCII.GetBytes( str );
            data = md5.ComputeHash(data);
            string md5Hash = System.Text.Encoding.ASCII.GetString(data);
            return md5Hash;
        }

        public static bool ConfirmPwd(string pwd)
        {
            string storedPwd, encryptedPwd;
            try
            {
                StreamReader fsPwdFile = 
                            new StreamReader(
                                new FileStream(
                                    Program.strPwdFilePath, 
                                    FileMode.Open, 
                                    FileAccess.Read));
                storedPwd = fsPwdFile.ReadToEnd();
                fsPwdFile.Close();
            }
            catch
            { return false; 
            }
            encryptedPwd = MD5Hash(pwd);
            if (storedPwd != encryptedPwd)
                return false;
            return true;
        }
}

// 2) Applying password on your image file 
       private void btnOK_Click(object sender, EventArgs e)
        {
            if (CommonMethods.ConfirmPwd(tbPassword.Text))
            {
                this.DialogResult = DialogResult.OK;
                this.Close();
            }
            else
            {
                MessageBox.Show
                   ("Wrong password, please re-enter", "Error",
                       MessageBoxButtons.OK, MessageBoxIcon.Error);
                tbPassword.Focus(); 
                return;
            }
        }

Hope this contains sufficient information, your require.

In my code, 2nd button event i.e., btnOK_Click() is the event which is used to verify the user's input password with his actual password saved through MD5Hash() method.

Here we don't require to decode user password, rather we have to decode encode again user input password (while authentication) and match with his earlier created password (stored on system wherever we want) each time he try to access our source.

So, First method saves user input password after converting it to MD5 encryption.

And second method authenticates user input password with comparing it with saved password after its MD5 encoding too.

StreamReader fsPwdFile = new StreamReader( new FileStream(Program.strPwdFilePath,FileMode.Open, FileAccess.Read));
storedPwd = fsPwdFile.ReadToEnd();