This transition is used to place a video inside another video. By default, the Video 2 track is placed inside Video 1 track. Select 'Swap video tracks for this transition' to have Video 1 track placed inside Video 2 track. It is helpful to think about the Picture-in-Picture transition in terms of Foreground Video and the Background Video. Depending on the 'Swap video tracks for this transition' option, either Video 2 (default) or Video 1 will form the Foreground Video.
Read the article: Applying Picture-in-Picture Transition.
The Picture-in-Picture Transition uses two rectangles to position the foreground video on the background video - The View Rectangle and the Bounding Rectangle. Both these rectangles relate to the foreground video. The Background video cannot be changed.
The View Rectangle is the position of the foreground video on the background video. The position is measured in terms of pixels. To specify a view rectangle, either move or resize the rectangle using the sizing handles or enter the Left, Top, Width and Height of the Rectangle.
The Bounding Rectangle also applies to the foreground video. This rectangle defines the part of the foreground video that shows up and fits in the View Rectangle.
For example if the Bounding Rectangle is placed at the top-right quarter and the View Rectangle is placed at the bottom-left quarter then the top-right quarter of the Foreground Video will show up at the bottom-left quarter on the Background Video.
To use one of the many Picture-in-Picture configuration available, select a preset from the Preset box. Click "Ok" when done.
When this option is checked, the dimension of both, the View as well as Bounding Rectangle become the same.
When you arrange the pictures of the two video tracks such that they overlap each other then the Second Video appears over the First Video. Check this option if you want the First Video to overlap the Second Video.
Video Edit Magic provides you with the option of changing the dimension when making movies. You can select a dimension other than the preview dimension (selected when creating a new project). If the dimension selected while making the movie (referred to as "movie dimension") is different than the preview dimension then the View and Bounding Rectangles of the Picture-in-Picture Transition is mapped to the movie dimension. The mapping is done by scaling up or scaling down the co-ordinates of the preview dimension to the movie dimension. If the difference between the two dimensions varies significantly then some precision is lost during the mapping operation and the Transition may appear cropped.