The App Icon image is the image that is used as the button for the app when it is installed on a mobile device. Since buttons are square, you can select the area of the image you want to use for the button by adjusting/moving the crop window. This image is also used when the album is shared socially, like on facebook. When shared on a social site, the whole image (not just the cropped part) is shared.
You have many ways in which you can change the app icon image.
If the image is blank, it is automatically loaded with the first image that is uploaded when you are uploading images to a gallery.
You can drag images from the visual design column and drop them over the current app icon image to replace it.
You can also click on the icon or the gray area immediately adjacent to the current icon and you can select a .jpg image from your computer or you can just drag and drop a .jpg image on the current app icon to upload a new icon image file from your computer.