Can I respond to an incoming message with a picture message?

Yes, you can use the <Message> verb and <Media> noun to send a picture message.
Here is an example for how to send a message with text and a picture:

<?xml  version="1.0"  encoding="UTF-­‐8"?>
<Response>
    <Message>
        <Body>I'm  hungry!</Body>
        <Media>http://www.images.com/cheesesteak.png</Media>
        <Media>http://www.images.com/pizza.jpg</Media>
</Message>
</Response>

For more information please see our Messaging TwiML documentation.