In the app, you'll see that your device gets a rating and your payout is based on this rating. They don't need to use your device for mining because well, mobile devices are general purpose devices and doing proof-of-work kind of pointless busy-work calculations is a waste of a general purpose machine. Your phone would get hot, and it won't be able to compete with a specialised mining rig.

Mining happens server-side, on Electroneum's own servers. They just want to ensure that they do pay out mining rewards to people who are going to make use of Electroneum as either a store of value or as a currency.

Your device does simulated mining, so you don't have to compete with bad-ass machines. Real mining occurs on Electroneum's servers, and you get payouts only once a minimum level of mining has been reached. It's load balancing, that's all.