Question
What does Hinduism state regarding the concept ‘God lives in us’?
Answer
Using Advaita Vedanta to answer your question, God(Nirguna Brahman) has no form, gender or qualities. Brahman cannot be called He or She but only It or That. Hence humans are not an 'image' of God. God didn't create the cosmos but became the cosmos. Hence everything in this world is Brahman, from a rock to a bacteria to a human. Only humans poses the potential to realize the true nature of Brahman.
The phrase "Atman is Brahman" is used in Advaita. The metaphor of Indra's Net is used to explain this. It is an infinite network with a jewel at each node. Each jewel reflects every other jewel and each jewel is a microcosm of the whole net. The jewels are the Atman the whole net is the Brahman. Hence Atman is a microcosm of Brahman.
Some illustrations of the Indra's Net: Image 1 , Image 2. Notice that each node reflects every other node and thus each node also contains the whole network in it.
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