For the most part: We limit the thumbnails to be twice as wide as they are tall or twice as tall as they are wide. This will accommodate most visual submissions just fine. Very wide images (like panoramas) will be cropped equally from both sides towards the center, so the middle is shown. Very tall images, like vertical comics, are cropped from the bottom up only, so that the top is shown (which is probably what people want since these images are usually read top down).
EDIT: PlayPossum, does that answer your question?