Did you crop the original image using the Photos app? When Photos crops a picture it doesn't really do the crop. It keeps the original uncropped image and records the crop rectangle. For some reason when we load one of these "cropped" images the Apple code we use to get an image takes the original image and scales and stretches it to completely fill the crop rectangle. This is what causes the distortion, and it appears to be a bug in iOS 7.
We'll have some sort of fix for this in the next release. For now the only solution is to crop your pictures using a different app, one that actually does the crop and saves the cropped image. Two free apps that do this are Snapseed
and Adobe Photoshop Express