About.com Urban Legends has this explanation:
It was created by combining a fairly standard image of New York Harbor with a 2004 photo of a supercell thunderstorm taken by professional storm chaser Mike Hollingshead (viewable in its original context here).
Nor is this the first time Hollingshead’s work has been appropriate for use in an online hoax. The same supercell image went around in May 2005 labeled “Storm Near Bunbury, Australia,” and again a few months later attached to an email entitled “Pictures of Hurricane Katrina.”
See also Snopes.com: The Imperfect Storm
Sandy is MUCH bigger. Here is a REAL photo. You can find many more on the web including the damage that is being done from the huge storm surge, the rain and wind. Maybe the colors aren’t as dramatic but the reality is. Storm photos are typically hoaxed. Other storms like Hurricane Issac also were associated with photoshopped images. It’s easy to buy into the reality of dramatic images, they are impressive and passed along to make others aware of the danger. But there also is a danger is passing off fakes as truth. Don’t do it.
UPDATE: Also seeing rumors…
— Boing Boing (@BoingBoing) October 30, 2012
Here’s more: 5 Fake stories circulating like a hurricane.
Post your finds in the comments.