The thumbnail can be a smaller resized version of your fullsize image or it can be a small cropped area of the fullsize image. The thumbnail MUST be a portion of the original image and it MUST be exactly 80 pixels wide by 80 pixels high.

The reason for this is viewing on the main gallery pages. All of the thumbnails line up perfectly with one another, not all different shapes and orientations. Just like this:

The advantages to the site are: 1) The gallery page is nice and inviting, not cluttered with different shaped thumbnails. 2) Increases the quality of the content posted to the site. A little more effort and care is taken with your "artwork" to present it in the best possible fashion. This will cut down on the typical "snapshots" that can be uploaded in bulk with little or no quality (and effort) at all.