It doesn’t crop the original image used on the observation page, but just to clarify, it does store cropped versions to use in other places on the site, e.g.
Compared to the original image
The square crops can be found at addresses like https://static.inaturalist.org/photos/101062631/square.jpg?1603120408
Related discussion: https://forum.inaturalist.org/t/cropping-with-thumbnail-dimensions-in-mind/6295