Most photos come out of a phone or camera as a rectangle, not a square, so squaring one off to 200x200 means something has to give. The tool can fit the whole image inside the square with empty space added around it, fill the square by cropping away the parts that don't fit, or stretch the image to force it into a square shape, and each choice changes the result in a different way.
A centered crop doesn't always land on the right spot
Filling the square usually crops around the center of the original image, which works well when your subject is already in the middle of the frame. If a face or logo sits off to one side of a wider photo, a centered crop can cut right through it. When that happens, cropping the source to roughly square yourself first, before resizing down to 200x200, gives you control over exactly what stays in frame.
Fine detail disappears fast at 200 pixels
200x200 doesn't leave much room to work with. Small text inside a logo, thin decorative lines, or subtle gradient shading tend to blur together or vanish entirely at this size, especially once the image is displayed even smaller in an actual avatar slot. Bold, simple shapes with strong contrast hold up far better as a tiny profile picture than anything with fine detail.
Stretching changes proportions, not just size
If the source isn't square and stretch mode is used instead of a crop, faces and objects get visibly squashed or widened to fill the square frame. That's rarely what you want for a photo of a person, but it can be perfectly fine for abstract patterns, textures, or backgrounds without a recognizable shape that would look distorted.