That's a DMCA "takeown notice". According to the Digital Millenium Copyright Act (DMCA) a copyright holder can order a service provider to delete a copy of his work immediately, with no paperwork, no court order, no establishing documentation. All he has to do is email the provider and tell them to do it. If they're not really the copyright owner you can complain and have them fined, but it's rare for that to happen. The law is often abused; a lot of people (myself included) think it's a terrible idea. It's actually nice of LJ to let you know about it first... it would be perfectly legal for them to delete it without even telling you.
Anyhow, the point is, just because you give the artist credit doesn't mean you have the right to use the picture. The artist decides that, as well as how much he'll charge for it (if anything), and he's completely within his rights to tell you to stop. In general, if you post a copyrighted picture (and all pictures are copyrighted until many years after the author's death) without the explicit permission of the author you're breaking the law. Yes, that means that almost all the pics you see on LJ and elsewhere are illegal. There are exceptions... if you see a logo for a Creative Commons (CC) license, for example, the author may have given specific permission to reporduce the work. There's also the concept of "fair use" which states that you can reproduce a work (usually just excerpts and small portions) for educational and critical purposes.
The good news is that you're not in trouble. If you comply with a takedown notice you have nothing more to worry about.