Usually what they do to complete the act is shove the cut off penis in the victims mouth. I don't know if he did in this case, and the media just didn't mention it.
In anycase, that is why they cut of the penis. It's a final insult, used for a variety of crimes against Islam, such as being an apostate, speaking against Mohammad, and I guess sleeping with a muzzie friends wife.
Rotten.com has some odd and disgusting photos - some of which are about this very subject. Algerian, I believe.