Yup, that's correct. You have to take in a picture in addition to another form of ID now. This is brand new, starting with the June 2011 LSAT. As per the LSAC website:
...all candidates must attach to their ticket a recent photograph (taken within the last six months) showing only the face and shoulders. The photograph must be clear enough so there is no doubt about the test taker's identity, and must be no larger than 2 x 2 inches (5 x 5 cm) and no smaller than 1 x 1 inch (3 x 3 cm). Your face in the photo must show you as you look on the day of the test (for example, with or without a beard). The photograph will be retained by LSAC only as long as needed to assure the authenticity of test scores and to protect the integrity of the testing process.
If you do not present both acceptable identification and the required photograph, you will be denied entrance to the testing room.
See:
http://lsac.org/JD/LSAT/day-of-test.asp#identification"The photograph will be retained by LSAC only as long as needed to assure the authenticity of test scores and to protect the integrity of the testing process." What does that even mean? Does that mean they'll return the photo to you eventually? That is cryptic as hell.

No, it doesn't mean that sometime down the road they are going to mail the pics back to everyone. It just means that they will retain them in their records for however long they feel like it before they decide to destroy them to clear space in the records warehouse for new records.
They'll probably hold onto them for at least 5 years, probably longer like up to 10 years. I say minimum 5 years because the time period from taking the LSAT to graduating law school and then going through the state bar character and fitness review/investigation to get licensed is ~5 years for most applicants, and issues/questions about integrity/cheating/academic dishonesty/fraud/what have you types of bad behavior from the past can pop up during that review/investigation process. Apparently they switched away from the thumbprint to the picture thing because the CSI shows taught the world how easy it is to fake or mess up finger prints for identification verification purposes later on, but that is just my speculation at the moment.