Imagination is a mental practice of creativity, creating something that is not wholly present in reality (i.e., a story world like Middle Earth or Narnia) or creating images or solutions or new things in your mind. Imagination is how you use your mind to internalize wonder and perceive reality in a more powerful way through creativity.
Christians don't talk a lot about imagination and wonder. We talk about rules and leave the "i-word" to the kids and the English professors. But the Christian life is one of immense, unlimited imagination and wonder.
God has created each human with the capacity for creativity, in His likeness, but as Christians, the blinders have been taken off the glasses through which we view the world. Though non-Christians can create good art and use their imaginations, they have a flawed perception of reality. Only Christians can see the whole story of the world - the dark, dark brokenness and the beauty of redemption and the anticipation of restoration. Only they can see the world and all its dirtiness and goodness through the lens of the work of Christ. Only they can see good and evil for what they are and the bold black lines that divide them.
Furthermore, the gospel itself inspires our awe and our wonder. We can marvel at the glories of the cross and our secured redemption. The Bible also inspires our imagination, though with this we must be very careful to not violate Scripture. Yet there are distinct portions of Scripture that God actually gives to "fire up our imagination," as Randy Alcorn says; for example, heaven.
"We cannot anticipate or desire what we cannot imagine. That’s why, I believe, God has given us glimpses of Heaven in the Bible—to fire up our imagination and kindle a desire for Heaven in our hearts. And that’s why Satan will always discourage our imagination—or misdirect it to ethereal notions that violate Scripture. ... I believe that God expects us to use our imagination, even as we recognize its limitations and flaws. If God didn’t want us to imagine what Heaven will be like, he wouldn’t have told us as much about it as he has." (Randy Acorn, Heaven, Ch.II)
We can use our imaginations when we read of the glorious depictions of the New Heaven and New Earth in Revelation and stretch our imaginations as far as we can by thinking about how good and better it will be there. When God gives us rich descriptions in the Bible, like the banquet in Esther or some of the prophets' visions, we are meant to imagine the mental picture the words were written to conjure. When Ezekiel stands in the valley of dry bones, don't yawn. Thrust yourself in that valley of bones with him! See the horror and the death and then realize the wonder of new life.
Our imagination is not a distraction to our Christian walk but a tool that God has equipped us with to create and to fuel wonder. Read good books, look at good art, make shapes in the clouds, appreciate the stars, love beauty, immerse yourself in studying the Scriptures, and stretch your imagination. Wonder at God's creation, be creative, use imagination to add meaning to truth, and stretch it beyond the stars - for the glory of God.