When an iPhone app uses Face ID does the app itself see your face (i.e. front cam)?
The app does not get access to the iPhone's front camera when you agree to this popup.
The app is only allowed to use Face ID functionality. This means that it will know only whether or not the device owner is present. The app can decide whether that must be determined by Face ID, or if the user can choose to enter their pass code instead.

https://developer.apple.com/documentation/localauthentication/logging_a_user_into_your_app_with_face_id_or_touch_id