Most Jews and Christians interpret this text as prohibiting the creating and worshipping of idols, not of prohibiting images in general. As long as it's not being directly worshipped, or being created for that purpose, you're fine. As always for any text, it's important to read the text before and after it.

As evidence, consider the vast number of practicing Jews and Christians who were or are artists.

“In Exodus 20:4 God condemned the carving of statues for the sake of worshipping them as idols–a blasphemy the Catholic Church also condemns.

In Exodus 25:18-20, on the other hand, God commands Moses to carve statues for a religious purpose: two cherubim which would sit atop the Ark of the Covenant.

Notice that these angelic images were to serve such an exalted purpose (not because the statues themselves were in any way intrinsically exalted but because of the use to which they would be put) that God was very exacting in the instructions he gave Moses as to the materials to be used and the posture in which they were to be carved.

Similar divine commands to carve statues and embroider images of various religious objects are found in Exodus 21:6-9, Numbers 21:6-9, 1 Kings 6:23-28, and 1 Kings 7:23- 39. In each case, the statue or embroidered image was intended by God for a religious use.

Although the worship of anything, not just statues, in place of the True God is idolatry, there are times when statues are not just tolerable but recommended.

Just as those Old Testament statues were ordered fashioned by God to reminded the Israelites of heavenly realities, Catholic statues of Jesus and the angels and the saints serve the same purpose.”