I think it sort-of does something if you upload an irregularly-sized image (say, 100x200) instead of a square image. But I don't think it's particularly useful or works well even in that case, and I definitely support getting rid of it.

If we wanted to add this ability I think it would be better to put it in Files, and have an "Open Phphotophoshoph" button next to all file upload controls (e.g., user/project profile photos too) to do basic cropping/scaling/edits.