A round camera lens does produce a round image inside the camera. However, the outer edges of the round image will have more distortions, sometimes called aberrations, than the parts of the image closer to the center. This is because light must be bent more to reach the outer edges of the circular image.

To correct for these aberrations and end up with the best image possible, the rectangular sensor crops out the outer edges of the circular image from the lens. In other words, it only keeps the best part of the image from the lens. This gives you better photographs than you would get if you kept the entire circular image from the lens.

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