Yeah, it's the latter.
FTA:
There's 'bait' in videos and games that asks youngsters to contact momo via snapchat or whatsapp (or whatever).
Once messaged, police say, Momo may respond with disturbing images and instructions, including directions for self-harm. Momo may also make threats about what could happen if the directions are not followed, saying they will harm the child’s family or place a curse on them.
“While the threat of a curse may sound silly to an adult, it could be a very frightening prospect for a young child and they may feel under pressure to carry out acts to protect themselves or family from further harm,” Det.-Sgt. Elaine McCormill said in a statement.
The actual picture is of a sculpture made by a Japanese special effects company that was shown in some art exhibition called "The Gallery of the Netherland III" . "Ghost Gallery III" is an art exhibition held in Ginza "Gen Gallery (vanilla gallery)" from August 15 to August 27, 2016.
But it's made out to be some mystical creature that will hunt you down and hurt your family if you don't do what you're told.
Edit: but the creepiest image I've seen is this skin condition.
It's evil. Even when you
know it's just a lotus flower seed pod photo-shopped onto someone's shoulder, it's still hard to look at.