It is difficult to identify the reason for obtaining the results shown by you, as there is no data provided to deal with. It would be helpful if you could share the image you want to overlay and elaborate on how did you obtain the contour for it, as your results suggest a miss match in the size of image and contour.
However, based on the description provided by you, following is kind of a kludge that should work for your use case. So I think the issue you were facing was because the 'contourf' was drawn on the same axis and axis for the figure was bigger.
Therefore we would try to follow the following order of steps
1) Draw the contour first
2) Note the range of axis (given by 'XLim' and 'YLim')
3) Hold on to current axis
4) Do 'imshow()' with the specification of the 'Xdata' and 'Ydata' as the range seen in step (2) (Xdata = XLim and Ydata = YLim) and preserve its handle.
5) Change the 'AlphaData' of ImageHandel to value between '0' and '1' (opaque) to adjust the transparency.
if true
% obtaining the contour plot and image data in some variable
Z = 10 + peaks; % to get contour
img = imread('coloredChips.png'); % image to overlay
% drawing contour and overlaing image
figure
[c,cont] = contourf(Z,2)
contP = get(cont,'Parent')
X = contP.XLim
Y = contP.YLim
hold on
imgh = imshow(img,'XData',X,'YData',Y)
imgh.AlphaData = .2
end
