I'm disappointed in this as well. They really came in handy on occasion and I don't remember coming across anything inappropriate. I emailed them about it the other day and here is their reply:
"On July 15, 2013, we discontinued the customer-uploaded image feature. Customer images will no longer show on Amazon product pages. This isn't a decision we came to lightly. While customer-uploaded images has a small, dedicated group of active users, it hasn't been broadly embraced by our customers. Shutting down this feature will allow us to focus on building a better overall Amazon experience for you.
Although there were many people that found value in the feature, it did create more issues than it did solutions, as we had inappropriate images being uploaded, incorrect ones unrelated to the item as well as numerous emails from concerned customers about them. Customers would also mistakenly upload pictures of themselves as they believed customer images meant that they had to add images of themselves in the hopes that it would be added to their public profile and displayed in reviews or discussions."
Lame excuse in my opinion, but at least they replied with something more than generic bs.