how to create a gray scale image from pixel values using java

Instead of converting the image to grayscale by manipulating the pixels yourself I'd suggest creating a new BufferedImage of TYPE_BYTE_GRAY. Then you can manipulate the pixels directly.

public static BufferedImage convertToGray(BufferedImage biColor)
{
    BufferedImage biGray = new BufferedImage(biColor.getWidth(), biColor.getHeight(), BufferedImage.TYPE_BYTE_GRAY);
    biGray.getGraphics().drawImage(biColor, 0, 0, null);
    return biGray;
}

public static void manipulatePixels(BufferedImage biGray)
{
    byte [] imageData = ((DataBufferByte)biGray.getRaster().getDataBuffer()).getData();

    for (int i = 0; i < imageData.length; i++)
    {
        // do manipulation/encryption here - or on the entire array at once
    }
}

If for some reason you want to create a brand new image from the byte array, just create a new image and copy the pixels into its byte array.

public static BufferedImage createImageFromArray(byte[] imageData, int width, int height)
{
    BufferedImage newImage = new BufferedImage(width, height, BufferedImage.TYPE_BYTE_GRAY);
    byte [] newData = ((DataBufferByte) newImage.getRaster().getDataBuffer()).getData();

    for (int i = 0; i < imageData.length; i++)
    {
        newData[i] = imageData[i];
    }
    return newImage;
}

public class GrayScaleTest {

    public void convert(int[] r, int[] g, int[] b, int imageWidth, int imageHeight) {
        int[] grayScaleValues = converToGrayscale(r,g,b);
        int[] encryptedValues = encryptValues(grayScaleValues);

        BufferedImage imageFromGrayScale = createImage(grayScaleValues, imageWidth, imageHeight);
        BufferedImage imageFromEncryptedValues = createImage(encryptedValues, imageWidth, imageHeight);
    }

    private BufferedImage createImage(int[] values, int imageWidth, int imageHeight) {
        BufferedImage image = new BufferedImage(128, 128, BufferedImage.TYPE_INT_ARGB);
        int[] raster = ((DataBufferInt) image.getRaster().getDataBuffer()).getData();
        System.arraycopy(values,0,raster,0,raster.length);
        return image;
    }

    private int[] encryptValues(int[] grayScaleValues) {
        // run your encryption
        // I just return input
        return grayScaleValues;
    }

    private int[] converToGrayscale(int[] r, int[] g, int[] b) {
        int sz = r.length;
        int[] grayscale = new int[sz];
        for(int i = 0; i < sz; i++) {
            grayscale[i] = (r[i] + g[i] + b[i]) / 3;
        }
        return grayscale;
    }
}

You can of course use a different bufferedimage type, but I didnt want to have to deal with anything other than ints for this. But this code snippet should do what I think you want done.

there are multiple ways to transform a color to a greyscale, your way is the simpliest and correct.

you can Turn your array back into a picture by using this http://www.java2s.com/Tutorial/Java/0261__2D-Graphics/CreateBufferredImagewithcolorsbasedonintegerarray.htm

BufferedImage image = new BufferedImage(width, height,BufferedImage.TYPE_INT_RGB);
image.setRGB(0, 0, width, height, data, 0, width);

while data is a 1D IntegerArray with the length (hope I didnt mix up the indices)

int[] data=new int[height*width];
for (int i=0;i<height;i++){
    for (int k=0;k<width;k++){
        //EDIT: The gray[][] array, is the one you already got.
        data[i*width+k]=getIntFromColor(gray[i][k],gray[i][k],gray[i][k]);
    }
}

where the method of creating the correct Integer from your colorcode (int, int, int) is given in: how to convert rgb color to int in java

public int getIntFromColor(int Red, int Green, int Blue){
    Red = (Red << 16) & 0x00FF0000; //Shift red 16-bits and mask out other stuff
    Green = (Green << 8) & 0x0000FF00; //Shift Green 8-bits and mask out other stuff
    Blue = Blue & 0x000000FF; //Mask out anything not blue.

    return 0xFF000000 | Red | Green | Blue; //0xFF000000 for 100% Alpha. Bitwise OR everything together.
}

Greetings Reineke