It does help making smoother ellipses. In general I suggest leaving this option on unless you specifically need it off. You can also use the marquee to crop images to fit perfectly into predetermined shapes such as a computer screen, TV screen or picture box in a layout program. To make an image fit a shape, choose fixed size or constrained aspect ratio from the style option and be sure the feather radius is set to zero. If the crop option is not available to you in the edit menu, you probably had a feather radius other than zero set.
Crops are always rectangles.
The lasso allows you to select areas of an image by drawing with the mouse or stylus. Remember you can use this tool in conjunction with the other selection tools as mentioned above. The lasso can be used to make straight line segments.