Just found this answer on wiki answers but as it is wiki don't take it as 100% correct:
Usually, it is an optical illusion caused by straight-on lighting coming from the photographer's position (the most common use). A photograph is a 2 dimensional representation of a 3 dimensional subject, and this type of light has a tendency to "flatten" the subject and reduce the illusion of depth. However, the apparent width does not change, tending to make the subject look bulkier.
There is also a psychological aspect that may come into play at the same time. Even though we may occasionally view ourselves in a mirror (which appears 3-D), we may appear less flattering in the moment a picture is taken because we are more critical of the entire 2 dimensional image of us.
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