Currently Lync/O365 allows a user to choose their photo and everyone sees that image.
Some users don't have photos, some have obscure photos or random images. Given the status bar showing who's in a conversation shows only people's images (when in its minimal form / saving screen real estate) it's hard to tell who's in the conversation.
Being allowed to define an image for your contacts which overrides their image should one exist ensures you can put something that you recognise for each person; i.e. a photo if they don't have one, or just a picture showing their name / whatever suits your preference.
This avoids a reliance on getting company policies written and enforced around what people's images should be / any politics around that.