Use the following code to generate the scaled Image which will be scaled to given PictureBox....
In this you can change the size of PictureBox and see how resizing works..

using System;
using System.Collections.Generic;
using System.ComponentModel;
using System.Data;
using System.Drawing;
using System.Text;
using System.Windows.Forms;
using System.Drawing.Drawing2D;

namespace ImageTest
{
    public class Form1 : Form
    {
        public Form1()
        {
            InitializeComponent();
        }

        private Button btnLoadImage;
        private PictureBox pictureBox1;
        private ColorDialog colorDialog1;

        /// 
        /// Required designer variable.
        /// 
        private System.ComponentModel.IContainer components = null;

        /// 
        /// Clean up any resources being used.
        /// 
        /// true if managed resources should be disposed; otherwise, false.
        protected override void Dispose(bool disposing)
        {
            if (disposing && (components != null))
            {
                components.Dispose();
            }
            base.Dispose(disposing);
        }

        private void btnLoadImage_Click(object sender, EventArgs e)
        {
            using (OpenFileDialog fd = new OpenFileDialog())
            {
                if (fd.ShowDialog() == DialogResult.OK)
                {
                    try
                    {
                        using (Image img = Image.FromFile(fd.FileName))
                        {
                            ProcessImage(img);
                        }
                    }
                    catch (Exception ex)
                    {
                        MessageBox.Show("Error processing Image File" + Environment.NewLine + "Please check that file is valid image");
                    }
                }
            }
        }

        private void ProcessImage(Image img)
        {
            Rectangle newRect = GetScaledRectangle(img, pictureBox1.ClientRectangle);
            pictureBox1.Image = GetResizedImage(img, newRect);
        }

        #region Windows Form Designer generated code

        /// 
        /// Required method for Designer support - do not modify
        /// the contents of this method with the code editor.
        /// 
        private void InitializeComponent()
        {
            this.btnLoadImage = new System.Windows.Forms.Button();
            this.pictureBox1 = new System.Windows.Forms.PictureBox();
            this.colorDialog1 = new System.Windows.Forms.ColorDialog();
            ((System.ComponentModel.ISupportInitialize)(this.pictureBox1)).BeginInit();
            this.SuspendLayout();
            // 
            // btnLoadImage
            // 
            this.btnLoadImage.Location = new System.Drawing.Point(377, 110);
            this.btnLoadImage.Name = "btnLoadImage";
            this.btnLoadImage.Size = new System.Drawing.Size(75, 23);
            this.btnLoadImage.TabIndex = 0;
            this.btnLoadImage.Text = "Load Image";
            this.btnLoadImage.UseVisualStyleBackColor = true;
            this.btnLoadImage.Click += new System.EventHandler(this.btnLoadImage_Click);
            // 
            // pictureBox1
            // 
            this.pictureBox1.BackColor = System.Drawing.SystemColors.AppWorkspace;
            this.pictureBox1.Location = new System.Drawing.Point(29, 46);
            this.pictureBox1.Name = "pictureBox1";
            this.pictureBox1.Size = new System.Drawing.Size(200, 200);
            this.pictureBox1.SizeMode = System.Windows.Forms.PictureBoxSizeMode.CenterImage;
            this.pictureBox1.TabIndex = 1;
            this.pictureBox1.TabStop = false;
            // 
            // Form1
            // 
            this.AutoScaleDimensions = new System.Drawing.SizeF(6F, 13F);
            this.AutoScaleMode = System.Windows.Forms.AutoScaleMode.Font;
            this.ClientSize = new System.Drawing.Size(514, 366);
            this.Controls.Add(this.pictureBox1);
            this.Controls.Add(this.btnLoadImage);
            this.Name = "Form1";
            this.StartPosition = System.Windows.Forms.FormStartPosition.CenterScreen;
            this.Text = "Form1";
            ((System.ComponentModel.ISupportInitialize)(this.pictureBox1)).EndInit();
            this.ResumeLayout(false);

        }

        #endregion

        public static Rectangle GetScaledRectangle(Image img, Rectangle thumbRect)
        {
            if (img.Width < thumbRect.Width && img.Height < thumbRect.Height)
                return new Rectangle(thumbRect.X + ((thumbRect.Width - img.Width) / 2), thumbRect.Y + ((thumbRect.Height - img.Height) / 2), img.Width, img.Height);

            int sourceWidth = img.Width;
            int sourceHeight = img.Height;

            float nPercent = 0;
            float nPercentW = 0;
            float nPercentH = 0;

            nPercentW = ((float)thumbRect.Width / (float)sourceWidth);
            nPercentH = ((float)thumbRect.Height / (float)sourceHeight);

            if (nPercentH < nPercentW)
                nPercent = nPercentH;
            else
                nPercent = nPercentW;

            int destWidth = (int)(sourceWidth * nPercent);
            int destHeight = (int)(sourceHeight * nPercent);

            if (destWidth.Equals(0))
                destWidth = 1;
            if (destHeight.Equals(0))
                destHeight = 1;

            Rectangle retRect = new Rectangle(thumbRect.X, thumbRect.Y, destWidth, destHeight);

            if (retRect.Height < thumbRect.Height)
                retRect.Y = retRect.Y + Convert.ToInt32(((float)thumbRect.Height - (float)retRect.Height) / (float)2);

            if (retRect.Width < thumbRect.Width)
                retRect.X = retRect.X + Convert.ToInt32(((float)thumbRect.Width - (float)retRect.Width) / (float)2);

            return retRect;
        }

        public static Image GetResizedImage(Image img, Rectangle rect)
        {
            Bitmap b = new Bitmap(rect.Width, rect.Height);
            Graphics g = Graphics.FromImage((Image)b);
            g.InterpolationMode = InterpolationMode.HighQualityBicubic;
            g.DrawImage(img, 0, 0, rect.Width, rect.Height);
            g.Dispose();

            try
            {
                return (Image)b.Clone();
            }
            finally
            {
                b.Dispose();
                b = null;
                g = null;
            }
        }

    }
}