This is a real toughie because there is a real dearth of picture books in my life. It's not really fair to chose one I haven't read, so Hyperbole and A Half is out (although it fits the brief perfectly - the blogs are NOTHING without the illustrations), and I don't really want to chose any of my childhood classics like Winnie The Pooh.
My pick is Kit Williams' Masquerade. It's the story of lost trinket in more ways than one - the trinket of the story was hidden by Williams and the book's illustrations gave clues as to its location. In the end, the jewel was found thanks to some insider knowledge, but it's a fascinating puzzle with some gorgeous paintings, plus I really love hares.