How can I control who can see my pictures?
Firstly to begin with the ScrapBook automatically uses any custom friends groups you have setup on your LiveJournal account. If you visit http://pics.livejournal.com/manage/groups you will notice that all your custom friends groups are prefixed with LJ: to show that they are groups lifted directly from your journal.
You can also create groups specifically for your ScrapBook by going to http://pics.livejournal.com/manage/groups and entering a new group name in the Create Group form field. This will take you to a new page where you can enter the usernames of all the members you wish to add to this group.
You can also use the Edit a User's Memberships field to bulk add/remove a specific user from your custom groups.
Now, when you upload new images http://pics.livejournal.com/manage/upload you will see a field underneath Filename titled Security. By default this is set to public, meaning that everyone can see your image. Use this menu to either select a specific group, all groups, registered users or make the image private. A specific group means only users of that usergroup can view the image you upload. All Groups means that members of all your usergroups (i.e. all your friends) can view the image. Registered users means only logged in registered users of LiveJournal can view your image and Private, much like Private entries in LJ, means only you can view the image when you are logged in. Once you have selected the desired security settings continue uploading your image as normal.
You can also edit the secruity settings of images you have already uploaded, either by viewing the image directly and clicking on the manage link or by going to http://pics.livejournal.com/manage/gals and entering the specific gallery and the clicking on the image you wish to change. As before, simply change the security field to your desired setting.
Also on http://pics.livejournal.com/manage/gals you can click on a gallery name and set security for the entire gallery, meaning that all images within the gallery will adopt the security settings of the gallery they are part of. However, note that you can still go and change the security settings of individual images within a gallery, which is useful if you want certain groups to be able to see a particular image in a gallery, but not the entire gallery itself.
Security settings can also be added to new galleries, http://pics.livejournal.com/manage/gal?, by changing the Visible to field to the desired setting.
Further reading:
What are custom friends groups? How do I use them?
http://www.livejournal.com/support/faqbrowse.bml?faqid=102