Using the Shape Tool you can push or pull on the sides. This example also has a black outline and soft shadow added. To restore the image back to its original rectangular shape, select the "Un-clip" in the clip mode of the Photo Tool InfoBar.

When photos are edited this way, they are treated like any normal vector shape, containing a bitmap fill. This is why you can use the normal line and shape editing features, and indeed you can use the Photo adjustment handles to adjust the size, angle and position of the photo "fill" inside the shape.