How to create breathing wall effect?

img = Import["http://i.stack.imgur.com/8Pgul.gif"];
image = img[[3]];

gr = Graphics[{EdgeForm[Directive[Thickness[.1], Black]],
FaceForm[Opacity[0]], Rectangle[{0.1, 0.1}, {.9, .9}]}, ImageSize -> 400];

Animate[
   Overlay[{
            ParametricPlot3D[{x , y , 1 + .2 ( Cos[ t y + (1 - t) x] )}, 
             {x, -Pi, Pi}, {y, -Pi, Pi},
             Mesh -> False, PerformanceGoal -> "Quality", Boxed -> False, 
             Axes -> False, ImageSize -> 400, 
             Lighting-> "Neutral", (*thanks: Olexandr R. *)
             PlotStyle -> Texture[image], ViewPoint -> Top], gr}, 
      Alignment -> Center], 
 {t, 0, 1}, AnimationRunning -> False, AnimationRate -> .5]

Here's a way of implementing sinusoidal undulations, updated to write out an animated gif, and to use a smaller image, as suggested by Murta.

img = ImageTake[Import["http://i.stack.imgur.com/XMwRi.jpg"], {200, 500}, {200, 600}];
Export["breathing.gif", 
 Table[ImageTransformation[img, # + {.004 Sin[4 #[[1]] + p], .005 Sin[5 #[[1]] + p]} &, 
   Padding -> Black], {p, 0, 2 Pi, 0.3}], "DisplayDurations" -> 0.3]

You can make the animation smoother by replacing 0.3 with 0.1 or smaller and the DisplayDurations 0.3 to 0.1.