It depends on what you pass to glTexCoord2f. 0.0, 0.0 being the lower left, and 1.0, 1.0 being the upper right. And anything between 0 and 1 being somewhere in between.
So in answer to your question, it will distort the image if all you use are 0s or 1s, but if you calculate the appropriate tex coords, you can do it w/o distorting the texture.
I belive it clips off what you dont use. I always liekd the saying “think of the coordinates as the cookie cutter and think of the texture as the dough.”