It's practiced in many cultures throughout the world, and it doesn't seem to hurt the kids or cause them major psychological issues, it just makes their skulls a weird shape.
Considering some of the extremely painful body modification practiced on children in some cultures, I'd call this pretty mild comparatively speaking.
It really was done everywhere. And relatively recently, even in Europe. Here's someone who had it done to them in France in the age of photography.
Bear in mind that I'm 100% against circumcision, but, at least in Judaism, it happens within the first week when the brain is about as unformed as it can be but you still be alive and out of the womb, so it probably doesn't cause a lot of inherent psychological problems when you're talking about the process itself. I'm sure that knowing that you look different from other men because of something that could have been avoided might take a psychological toll on some people. It never bothered me, but I would never do it to my own son if I had a son.