Medusa disguised herself as Aunty Em who owned a Garden Gnome Store. When Annabeth saw her, she could not recognize her because her face was completely covered with a veil.
Medusa's face could transform anyone to stone and hence she was capable of making many statues. She had numerous statues that she stored in her warehouse.
Medusa was able to recognize Annabeth when she saw her grey eyes. The story is a Greek myth and in the end Medusa's head was chopped off by a Greek God.