A circle shown inside a square preview can be a genuine transparent mask or just a white background pretending to be one. A transparent PNG lets the same circular image sit on several backgrounds.
Circular Profile Image crops the centre square of the source and removes pixels outside the circle. It does not move the subject toward the centre automatically.
The shorter side sets the size
A 400 by 300 source becomes a 300 by 300 circular PNG. The square crop comes from the centre, so some content from the left and right is removed before the circular mask is applied.
The outer corners of that square are transparent. The centre remains visible according to the original pixels' alpha. The downloaded file is still square in dimensions because image files use rectangular canvases.
A subject near an edge can be cut by both the centre crop and the circle. Prepare a better positioned source first if the result removes an important part of the face or logo.
This is a shape mask, not a portrait check
The tool does not detect faces, remove arbitrary backgrounds or assess whether a photo satisfies an application requirement. A circular profile image is usually a presentation asset, not a passport photo substitute.
PNG keeps the transparent shape. A later JPEG conversion fills the corners with a solid background and changes how the asset behaves on a page.
The mask has hard pixel boundaries. Check the curve at the display size you need, especially for a very small icon where individual edge pixels are more noticeable.
Keep the original rectangular picture beside the circular download. It gives you room to try another crop if the first circle clips the subject too tightly.