Devotees of Krishna worship Him in various Deity forms with the understanding that God is the source of all energies—the Absolute Truth—and can appear before us in any form He likes. Everything about the Supreme Person, including His form, is spiritual and worshipable.
Vedic scriptures first of all define who is Supreme and who isn’t. They also describe the science of Deity worship in detail—what Deities should look like, how they’re supposed to be made, how to worship Them, and the benefits of such worship.
Krishna, or God, is pure spirit. He’s not made of anything material. But in the material world, we can’t see spirit. All we can see is matter. By agreeing to appear in the form of a Deity, Krishna allows us to see, honor, and serve him, even while we’re still in material existence.
Krishna consciousness is a science of practical action, not an armchair philosophy. Deity worship is meant to fully engage our senses in serving a form of the Supreme Person we can see and touch. One can bathe, dress, feed, and decorate the Deity, as well as entertain Him by singing and dancing. The more absorbed in such service we are, the more tangible our relationship with Krishna becomes.
Deities may be made of stone, wood, metal, paint, or even worshiped within ones mind. Deity worship is distinct from idolatry, which is usually defined as worship of any cult image, idea, or object, as opposed to the worship of a personal form of God.
God is omnipotent. All energies, material and spiritual, are completely under His control—He can turn matter into spirit and vice versa. So, if He wants to appear in a form (apparently) made of wood or stone, who are we to say no?