Those grey borders are on all four sides. It just depends on the size and shape of your pictures which ones show.
It is a totally non-functional adition that Etsy made for no apparent reason.
Or probably just to show us, sellers, that our pictures don't have the sizes Etsy prefers. Because when your pictures are large enough and square, the ugly borders don't show.
Most of my pictures are square, but only 500x500 px. That is because most of my items are small and I don't want them to zoom in much larger than life. So yes, now I have to accept that the all white background (in which my products seemed to float because of my own white backgrounds and I loved that) has been replaced by ugly faded grey backgrounds. No more crisp look. Thanks, Etsy!
Why not fix things that actually need fixing?