Scrunch in the example sentence you have given means to wrinkle your nose. It is something a person might do if they smelled something that they found offensive. The word scrunch however has a few other meanings as well... "The kids were scrunched together in the back seat." means they were sitting side by side tightly together. "I know your nervous, but don't scrunch the fabric." means not to ball up or twist the fabric which may leave creases and/or wrinkles. There are other means for the word scrunch, but these are the most common.

Scrunch is when you kind of squash up your nose http://27.media.tumblr.com/tumblr_lw0zyrLTok1qzcznro1_400.jpg