Ross Collins gets rather upset if you suggest that what he does could be described as mere decoration. "Decoration is a very frivolous word," the Glasgow-based children's book illustrator tells me with maybe an ounce of huffiness when I bring the idea up. "I wouldn't like to think of it like that. No, it's storytelling."

Collins, whose latest book, The Elephantom, is in the running for the prestigious Kate Greenaway Medal next month, presumably knows what he's talking about.

Others may feel differently, though. For a start there's the deep-pocketed individual who spent £21,600 (including premium) at a Bonhams auction in London recently to acquire an original illustration by Winnie the Pooh illustrator EH Shepard entitled Tiggers Don't Like Honey. Rather less than the £30,000 estimate put on it, but even so: when you spend that kind of money, wouldn't you want to hang it in a prominent place on your wall?

And, given that Bonhams has two illustration sales a year in which, junior cataloguer Alexandra Ault explains, they would expect to have at least one Shepard lot on offer (as well as the work of such much-loved children's illustrators as Mervyn Peake and Edward Ardizzone), that suggests that the art of children's illustration is decorating a lot of walls up and down the country.

"They're delightful aren't they?" Ault argues. "There's nothing serious about them. They're always a pleasure to look at. They're just something for people to enjoy."

Then again, as Ault herself admits, there is something more to these illustrations than just their aesthetic delights. "The thing about a lot of the children's illustrations is they strike a chord for people who perhaps read the books when they were children and now go on to read them to their children."

There's something in this - certainly something beyond the merely decorative. EH Shepard's illustrations are indeed delightful to look at but they also speak to us (or those of us raised on Winnie the Pooh at least) about how we first discovered the delights of stories and story telling.

Children's author and artist Debi Gliori is another happy to speak lovingly of Shepard's work. "I think nobody can think of Pooh or indeed Christopher Robin without seeing his pictures. You can't separate them out."

Which is, she argues, pretty much the point. "One test of a really good picture book I've heard is that the story doesn't make sense without the pictures and vice versa. You actually need the two working together."

Gliori and Collins are both modern-day Caledonian Shepards, keen to entrance, in their very different ways, children with their words and pictures the way they themselves were entranced as kids. "When I was a child the reason I got into illustration, I think, was because I had such a love of them," Collins recalls.

"The story was important but I would pore over the illustrations for a long time. My mother still talks about how she was fascinated by the concentration I would have picking out little details in the illustrations so there's obviously a life there that attracts a child. I try to do the same thing with my work now."

He is thrilled when he meets children who pay as much attention to his work as he used to do to the books of Richard Scarey. But, kids apart, how appreciative people are of what they do isn't quite so clear.

"I'm going through a rather bleak phrase," admits Gliori. "My appreciation of the industry is at an all-time low. I've certainly noticed, and I know I'm not alone in this, picture books have really fallen by the wayside in the past four years and that is reflected in diminished sales across the sector."

the reasons are many and various, she says. There's the current cult of celebrity, there's the fact that many publishers are too busy running around looking for the next Harry Potter. Then there's the fact that booksellers are fewer and less adventurous. "I'm still publishing but I'm finding it's not as wide open a market as it used to be and there seems to be less enthusiasm all around. It must be incredibly hard if you are a newcomer unless you are willing to work for absolutely nothing - well, virtually nothing," she says.

Collins shares some of Gliori's concerns. "One of the problems is the larger bookstores have really tightened their lists and they pick favourites that they want to promote at the expense of other books. They make the publishers scared and they rein things in." And picture books, he says, rarely get much promotion or publicity. Even so, he is a little more sanguine than Gliori about future prospects. "There's always going to be toddlers - there's always going to be a market out there," he comments.

It is a very specialised market, though. And you do wonder sometimes: why should kids have all the fun? Why is it that what Collins and Gliori do is considered suitable for children only? Because, Collins suggests, that is how it has always been.

"I think as a culture we do consider it juvenile to have illustrations in books. You move from children's books into comics and comics are seen to be a pre-pubescent phase which isn't taken very seriously in this country and is ditched once you get into your teens - and I think this leaves illustrations behind with comic books."

"There is something rather shaming to have pictures in a book for adults," Gliori agrees. "But if it was done well it could actually be rather entrancing."

She wonders, though, if the growing taste for manga and graphic novels might suggest a sea-change is currently going on in our attitudes to the visual. "I walked into a bookstore recently and saw they had an entire wall devoted to manga - and that's words and pictures."

SAYING that, for the moment she is not planning to deviate from the familiar. This autumn sees the publication of her latest picture book, Goodbye Baby Bat. She's rather proud of it. "In the very last spread in the book, the mother bat's wings are wrapped around the baby bat. It's gorgeous. I'm very pleased with it."

And in that illustration maybe we can see exactly why these images speak so directly to us, why years later some of us have images in our heads that conjure up a time and a place so evocatively, images that conjure up the perfume of our childhood. It's because they plug us into our own past so directly. "We are more open then than we'll ever be as adults," Gliori says of childhood. "We are absolutely wide open and these images speak to us subconsciously of a time when everything was safe and perfect and we were wrapped up in arms at bedtime. It is that feeling of having cocoa and a warm fire at bedtime and knonwing that nothing of the outside world can get in. So I suppose those images are really important to us because of that. Because that was - for those of us who were lucky to have it - a perfect time."

And that's why children's illustrations may possibly be worth that little bit more than the most expensive wallpaper. Ross Collins was right. They're not decoration at all.

Portraits of five favourites

The Hamburg-born, London-based artist teamed up with Scottish writer Julia Donaldson to create one of the classics of modern kids' lit, The Gruffalo. More than two million copies have been sold.

The Eton-educated Benson has illustrated more than 24 books by a variety of authors stretching from Roald Dahl to Herman Melville (a version of Moby Dick, no less). But his most familiar work may still be his illustrations for Martin Waddell's Owl Babies.

The creator of the delightful Melrose and Croc series, Chichester Clark was taught by the doyen of children's illustrators, Quentin Blake. She has also contributed to magazines as diverse as New Scientist and Cosmopolitan.

The creator of Katie Morag was born in Gourock but fell in love with the Isle of Coll. She has recreated the island in her books, transmuted into the fictional island of Struay, home to her red-headed, sometimes bull-headed creation who she described as "the wee girl I always wanted to be".

After delighting and horrifying Guardian readers for years with her sharp social satire of the sandal-wearing classes in comic strip form, Simmonds turned to writing and drawing children's books with great success in the late 1980s.