There is no such type as 'entity', only 'object', 'user', 'group' and 'site'. By design entity owners should be user entities (there are rare exceptions, but you want to avoid that). Set your image's container_guid to album's guid, and use elgg_get_entities().

$image = new ElggObject();
$image->subtype = 'image';
$image->container_guid = $album->guid;
$image->access_id = ACCESS_PUBLIC;
$image->save();

elgg_get_entities([
   'types' => 'object',
   'subtypes' => 'image',
   'container_guids' => $album->guid,
]);

Thank you for the reply @Ismayil Khayredinov. How do I then loop through and display the images? I don't think I can use something like $description = $image -> description; here

$images = elgg_get_entities([
   'types' => 'object',
   'subtypes' => 'image',
   'container_guids' => $album->guid,
]);

foreach ($images as $image) {
   echo $image->description;
}