Quite an interesting project indeed.
The paper towel roll and cups are are working as an acoustic megaphone, also called (in ancient times) speaking trumpet.
Directional focus of the radiating sound waves is part of the way the megaphone works, but that's not all, as, as you have noticed, there is also amplification in other directions, not just the front of the cone (and the other project without paper cups also works to some extent).
That is due to an acoustic phenomenon called acoustic impedance matching. Acoustic impedance is often compared to electrical impedance, and much like in electrical circuits, circuit stages (e.g. amplifier and speaker) work better when their impedance is similar (or "matched"), also in acoustic systems sound energy is transmitted more efficiently when the vibrating body has an acoustic impedance closer to that of the propagation medium.
By adding mass to the vibrating body that's producing the sound, the megaphone approaches more closely the acoustic impedance of air, and thus the energy produced by the emitting device (the vocal chords in the case of a speaking trumpet, or the iphone speaker in the case of your daughter's project) is transmitted more efficiently to the air.
Note that yes, the megaphone device must vibrate for this to work, but the vibration is transmitted by the air vibrating inside the tube (much like the the vibration of air inside a brass instrument), not by direct contact between the speaker and the tube. The same principle was at work too in the primitive gramophones or phonographs. The stylus induced vibration to a diaphragm which produced faintly audible sound; it was this sound that was amplified by the characteristic horn.
I think that in the case of your project the paper roll provides the vibrating mass and the plastic cups some directional focus, as their mass is very little and the way they are tied to the roll is anyway very loose to receive vibration from the roll.