Why is the Linux kernel called an “image”?

The Unix boot process has (had) only limited capabilities of intelligently loading a program (relocating it, loading libraries etc). Therefore the initial program was an exact image, stored on disc, of what needed to be loaded into memory and "called" to get the kernel going.

Only much later things like (de-)compression were added and although more powerful bootloaders are now in place, the image name has stuck.

The word image also has a definition "A file that contains all information needed to produce a live working copy."

It doen't mean an "image" is just a 1:1 copy of a disk. As the photo represents the reality exactly as it was when shooting, an image of an executable program (or kernel) represents the program in a state, where it can the loaded (or unpacked) in the systems memory exactly as it is and then given control to it. That program can then start running from that state in a consistent manner. So the Linux kernel image is an image (a picture of the state) of the Linux kernel that is able to run by itself after giving the control to it.

Nowadays, the bootloader loads such an image from the hard disk’s filesystem (driver is needed), replaces itself with it and so gives the control to it. The booting process of a computer does that several times until the operating system finally runs. This is called chain loading. Or if a smaller program (chain-)loads a more complex one, it is called bootstrapping.

The BIOS loads the bootloader that is also an image, for example called boot.img in case of grub. That boot.img is not a file (if grub is installed); it is the name for the part that is in the Master Boot Record (MBR). If you dump that to a file it would then be an image in form of a file not rawly written to disk, but rawly written in a file. This is also a representation (image) of the earliest state where grub is able to load the rest of itself. grub then has its own mechanism how to fully load itself by loading other images. This is represented by the different stages in grub. After that, the bootloader loads the kernel image by replacing itself with the extracted contents of that file.

In math the kernel is the inverse image of a subset of the image of a some map, were the subset is equal to the identity element in the codomain. I'm fairly certain these names derive from mathematical concepts as they are related significantly in various fields in mathematics. That and considering Unix was derived in an academic environment.