Speaking to Journalism.co.uk, the Guardian's digital audience editor Chris Moran said the picture, which was awarded News Contribution of the Year, "was the purest definition of what we mean by the word 'witness'".
"This was not a case of grotesque rubber-necking," Moran said. "The photographer clearly understood the importance and sensitivity of the image, and that's something we [the judges] admired."
Part of the reason the image stood out so much, he said, was the fact that it was obviously taken by an amateur photographer (who chose to collect his awards under the name Vince Lee).
The photograph was included in a Guardian live blog around the attack, although Moran said there were "serious journalistic questions" about how it was presented.
Part of the image was pixelated due to its "sensitive nature", he added.
Moran said the image demonstrated a recognition of how the public can work with and alongside professional journalists to report significant events.
"You can tell this is an image submitted not for payment but in the interest of open journalism, because it is important," he said.
The image is one of 60,000 contributions which have been submitted to GuardianWitness since its launch just under a year ago.
Created to encourage more user-generated content onto the Guardian platform, GuardianWitness enables users to submit video, pictures and stories, and posts regular 'assignments' around a particular theme.
The best contributions are featured on the Guardian's website and sometimes in the newspaper.
The awards, marking the first anniversary of GuardianWitness, were judged by a panel including ITN newscaster Alastair Stewart, Deborah Rayner, vice president and managing editor EMEA at CNN, and Wolfgang Blau, director of digital strategy at the Guardian.
Claire Wallerstein of Kingsand, Cornwall, won the Bigger Picture category with her image of a seal pup sheltering among plastic rubbish.
Wallerstein, who runs a beach-cleaning group and is not a professional photographer, captured the image on her camera phone on one her local beaches near Whitsand Bay.
The RSPCA had contacted her to ask if she could check on the seal after receiving reports that it was in trouble.
But Wallerstein said the animal was so buried in rubbish she walked past it three times before finally spotting it.
Although she had not submitted to GuardianWitness before, a friend told her of an 'assignment' for images showing how the storms had affected UK beaches.
She said she thought GuardianWitness was "a fantastic idea."
She added: "You can be somewhere and get a photo that nobody else could get, which tells a story which might not otherwise get reported."
Other awards went to Matt Wood for his photo 'Mombasa meat market' and Andy Luck for his short film 'Pasty Child'.
EE Contributor of the Year Award – Andy Luck and George Tymvios for their film Pasty Child
News contribution of the year – Woolwich attack photographed by Vince Lee
Award for a series of contributions – Giles Bennett for his photographs of floods in Aberystwyth and Barbaros Kayan for his series on the Turkey protests
The Bigger Picture award – Exhausted seal pup sheltering among mounds of plastic waste by Claire Wallerstein
Human interest award – Mum in hospital by Caroline Johnson
Best Original Still Award – Soar by Souvid Datta
Food Award – Mombasa meat market by Matt Wood
Original Short Film Award – Andy Luck and George Tymvios for their film Pasty Child
Science Award – Science is everything: Higgs boson explainer by Dom Burgess
Pet of the Year Award – Mila contributed by Harpal Padwal