$image = <IN> ; only reads one line of the file. By default, a line is defined as ending with "\n". Undefining $/ before the read changes this definition and cause the file to be read as one line.

While you're at it, check for errors, and use the safer 3-arg open.

#! /usr/bin/perl

open IN, "<", "abc.gif"
   or die "Unable to open input file: $!\n";
binmode IN ;
local $/ ;
$image = <IN> ;
close IN ;

open OUT, ">", "test.jpg" ;
   or die "Unable to open output file: $!\n";
binmode OUT ;
print OUT $image ;
close OUT ;
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Update: You could also do it in blocks:

#! /usr/bin/perl

open IN, "<", "abc.gif"
   or die "Unable to open input file: $!\n";
binmode IN ;

open OUT, ">", "test.jpg" ;
   or die "Unable to open output file: $!\n";
binmode OUT ;

local $/ = \1024;  # Read in 1024 byte blocks.

print OUT $_ while <IN>;

close IN ;
close OUT ;
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