We will cheat a little bit in this tutorial: we will use Photoshop to pixelate image. See the footnotebelow the tutorial explaining why.
1. Open your image in Photoshop.
Go to Filter > Pixelate > Mosaic... In filter dialog box choose cell size big enough to produce a grid of approximately 20-30 squares in a row.
My image is 460 px by 320 px and I chose cell size of 20 px for it. You can figure out the optimal cell size for your image by dividing width of your image in pixels by any number between 20 and 30 (this is the number of cells in a row), depending on how detailed your image is and on the density of dots you'd like. Try to get number without fractions. You might want to adjust your image size before pixelating it.
In my example, width of 460 px divided by 23 cells in a row gives me 20 px cell size. And it also gives me 16 whole cells in a column (320 px height / 20 px cell size = 16 cells). We don't want any incomplete cells here. Write down your cell size, we will need it later. Click OK.
2. Now we need to place resulted image in Illustrator. Launch Illustrator. File > New to create new document. Be sure to select the same color mode for your document as a color mode of your image in Photoshop. Go back to Photoshop. Select All (Ctrl+A), copy image (Ctrl+C), go to Illustrator and paste it in a new document.
The part in Photoshop is over. Now we are going to finish our mosaic in Illustrator.
3. Select your bitmap image and got to Filter > Create > Object Mosaic. Dialog widow will open. Leave everything to default except Number of Tiles fields. In Width field type in the number of cells in a row (23 in my case). If you figured out how many cells you have in a column type this number in Height field. If not click on Use Ratio. If you want check the Delete Raster box to delete original bitmap image. Click OK.
You might want to ask me: Why did we have to pixelate image in Photoshop if Illustrator has the same feature? Good question. See the footnote at the bottom of this page for an explanation.
You should end up with the same looking pixelated image you started with, but now it's vector. Try clicking on image cells; you'll see that now each cell is a separate vector object.
4. Now we will create dots. Select Ellipse tool and click on top left cell. In a dialog box type in Width and Height fields type in the same number - it should be a slightly less then your cell size, so the circles won't touch each other. In my example I typed 18 px. because my cell size is 20 px wide and 20 px high. Click OK. Fill the circle with white and set Stroke to none. Position the circle in the middle of first cell. You can use guides to do that. Do not attempt using Align feature: it will shift cell from its place. We don't need to be precise, just make sure that circle's edges do not touch or go over cell's edges.
5. Select the circle and Ctrl+Shift+M to open Move dialog box. In Horizontal field type in your cell width (20 px in my example) and 0 in Vertical. Click Copy. You got two circles. While second circle is selected press Ctrl+D to Transform Again. Repeat until you got a full row of circles.
Now select the whole row and open Move dialog box again. This time type in 0 in Horizontal and negative cell height in Vertical field (-20 px in my example). Click Copy. Ctrl+D until you got whole image covered with dots.
6. Select all of your dots and Object > Compound Path > Make (Ctrl+8). Now select everything (dots and cells) and Object > Clipping Path > Make (Ctrl+7).
Here we go! We are basically finished. If you want to make more detailed image read on.
7. Duplicate the layer with finished mosaic. Name one of them Dots 1 and second Dots 2. Hide and lock Dots 1 layer. Select your grouped image on Dots 2 layer and Release Clipping Path. Make new layer and move there the compound path. Release Compound Path. Fill your circles with white.
8. Select the circle and Object > Transform > Transform Each. Set Horizontal and Vertical Scale to 80%. Set Move and Rotate to 0. Make sure to set reference point to center point so that each circle will scale to its center. Click Ok. Hide circles layer for a moment.
9. Now select your cells and Adjust their colors with Filter > Colors > Adjust colors and Filter > Colors > Saturate. Make visible the layer with small circles and repeat step 6.
You can add 2 more layers like that. At the end make visible all layers and enjoy the work you've done.
Dots 1 - original colors, circle size is 18 px;
Dots 2 - duplicate Dots 1; Filter > Colors > Adjust colors (R:G:B 10%:10%:10%); circle size 80% of original;
Dots 3 - duplicate Dots 1; no color adjustments; circle size 60% of original;
Dots 4 - duplicate Dots 1; Filter > Colors > Saturate (50%); circle size 30% of original;
Tip: When making color adjustments turn off the selection edges (View > Hide Edges, Ctrl+H) and check Preview box to clearly see the changes.
Try different settings to get other results.
Note: Why did we have to pixelate image in Photoshop if Illustrator has the same feature?
Though Illustrator has the same feature (Filter > Create > Object Mosaic) it produces vector mosaic with much worse quality. See mosaic image on the left that was created in Illustrator.