The Iris transition replaces one image with another by either growing or shrinking a shape, with all the area crossed by that shape's border replaced by the second image.
This option lets to select various shapes: diamond, circle, cross, plus, star and square.
The Iris Transition can be In or Out. If it's In, the shape appears to shrink inward from the edges of the screen toward the center. If it's out, the shape appears in the center of the screen, and grows outward until the video it contains fills the whole screen.
The illustration is of Iris Out with a Diamond Style.
Normally the media in Video 2 replaces Video 1 during the transition. Check this option if you want Video 1 to replace Video 2.