A picture like this can be created together with children using the paper quilling technique. We called this one "Under the sea", and it features sea animals and creatures: fish, a seahorse, an octopus, seashells, sponge tubes, a jellyfish, and a starfish (sea star).
Together with my kids painted the background using water colors. Then I quilled the animals and let the kids glue them onto the picture. Most of the quilling designs are from Twirled Paper: Make Almost Anything With Simple Paper Strips (Klutz), which is an awesome book I highly recommend. There are also a few simple designs I created myself, for example the seahorse and some kinds of fish.
Most of the elements of this picture can be made using the basic quilling shapes: the eye, the leaf, the half circle, the moon, the teardrop, etc. If you're new to quilling, check out my instructions for making basic quilling shapes.
UPDATE: A free excerpt from the book (PDF) can be downloaded here. It includes the instructions for making an octopus and angel fish.