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Land cover (LC) and land use (LU) dynamics induced by human and natural processes play a major role in global as well as regional patterns of landscapes influencing biodiversity, hydrology, ecology and climate. Changes in LC features resulting in forest fragmentations have posed direct threats to biodiversity, endangering the sustainability of ecological goods and services. Habitat fragmentation is of added concern as the residual spatial patterns mitigate or exacerbate edge effects. LU dynamics are obtained by classifying temporal remotely sensed satellite imagery of different spatial and spectral resolutions. This paper reviews five different image classification algorithms using spatio-temporal data of a temperate watershed in Himachal Pradesh, India. Gaussian Maximum Likelihood classifier was found to be apt for analysing spatial pattern at regional scale based on accuracy assessment through error matrix and ROC (receiver operating characteristic) curves. The LU information thus derived was then used to assess spatial changes from temporal data using principal component analysis and correspondence analysis based image differencing. The forest area dynamics was further studied by analysing the different types of fragmentation through forest fragmentation models. The computed forest fragmentation and landscape metrics show a decline of interior intact forests with a substantial increase in patch forest during 1972-2007.