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You are transforming the SELECTION, which is the box that holds the content. The content is what you want to transform. For that, you use Free Transform [Control+T] on the selected content.
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Are you trying to transform the layer itself or just the selection? If you're just trying to transform the layer you should just be able to select the layer and hit "CTR+t". This allows you to resize the layer that is selected. Transform selection is just for resizing the marquee.
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From your screen capture it looks like you are transforming many linked layers not transforming a selection.
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You are transforming the SELECTION, which is the box that holds the content. The content is what you want to transform. For that, you use Free Transform [Control+T] on the selected content.
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Thanks very much.
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