Some people believe that God and man are of the same essence, and that salvation for man is to recognise this, and to enter into the experience of that reality. But God tells us through the Bible that He created us out of the mud of the earth and gave us life. In other words, we are not God, but only beings He has created. There are some other Christians who think that because God has created men and women in His image, therefore all human beings have God in them (Ge.1:27). According to them, we should look at people with the recognition that God is in them, and therefore give them respect and dignity. But, being made in the image of God is not the same as having God in them.
In contrast to animals which have bodies and minds, we have been made as a composition of body, soul (Gk.psuche, mind) and spirit. Even though we can derive this understanding of this human 'trinity' from the different parts of the Bible, one place where it is mentioned clearly is 1Th.5:23, "Now may the God of peace Himself sanctify you entirely; and may your spirit and soul and body be kept complete, without blame at the coming of our Lord Jesus Christ." God is a spirit without a physical form, and so the part in us that is similar is our human spirit. Angels are also spiritual beings without a body. It is through our spirit that we can communicate with God. And it is this part of us that died instantly when Adam and Eve sinned (Ge.2:17). This 'death' here means disconnection from God, and this is how all of us who are born afterwards are born in sin (Ps.51:5). It is only when we acknowledge and repent from our sins and receive Jesus as our Saviour that our spirit gets regenerated and we are brought into fellowship with God. Regeneration is a work of the Holy Spirit in our spirit and without that, human beings do not have God in them.
What is it then to be created in the image of God? One part is that we have a spirit with a potential for a relationship with God. The other thing is that we have capabilities similar to God's which help us to function in ways that are similar to His. One important thing we have to remember is that all these capabilities are very small compared to God's infinite abilities. God is omnipotent, omniscient and omnipresent. But our might and knowledge are small, and we have to move around physically to be in different places. God is sovereign, but our sovereignty (free will) is limited. We can think, feel and make decisions just as God does, but in a very limited way. These are the effects of being made in the image of God. Another fact to recognise is that all of our capabilities have been distorted as a result of the Fall.
Obviously, this is very different from thinking that all people have God in them. It is wrong to say that when we look at people, we see Jesus in them, except as a recognition of a potential which they can have if and when they get born again.