The title explains. Here is an example:

PS D:\Data\python-sample\python> pysetup install
Installing from source directory: 'D:\\Data\\python-sample\\python'
running install_dist
running build
running build_py
running install_lib
byte-compiling D:\Data\cpython\Lib\site-packages\hello.py to hello.cpython-33.pyc
running install_distinfo
creating D:\Data\cpython\Lib\site-packages\hello-0.1.dist-info
creating D:\Data\cpython\Lib\site-packages\hello-0.1.dist-info\METADATA
creating D:\Data\cpython\Lib\site-packages\hello-0.1.dist-info\INSTALLER
creating D:\Data\cpython\Lib\site-packages\hello-0.1.dist-info\REQUESTED
creating D:\Data\cpython\Lib\site-packages\hello-0.1.dist-info\RECORD
PS D:\Data\python-sample\python> pysetup remove hello
Removing 'hello':
  D:\Data\cpython\Lib\site-packages\hello.py
  D:\Data\cpython\Lib\site-packages\hello-0.1.dist-info\METADATA
  D:\Data\cpython\Lib\site-packages\hello-0.1.dist-info\INSTALLER
  D:\Data\cpython\Lib\site-packages\hello-0.1.dist-info\REQUESTED
  D:\Data\cpython\Lib\site-packages\hello-0.1.dist-info\RECORD
Proceed (y/n)? y
Success: removed 5 files and 1 dirs
PS D:\Data\python-sample> dir D:\Data\cpython\Lib\site-packages\__pycache__


    Directory: D:\Data\cpython\Lib\site-packages\__pycache__


Mode                LastWriteTime     Length Name
----                -------------     ------ ----
-a---        14/10/2011     18:53        314 hello.cpython-33.pyc

The pyc file should have been removed. It's not critical (the pyc file gets ignored, see PEP 3147) but as pysetup created it, pysetup should remove it...