As a teacher I like to add a little commentary to some of the video clips I am sharing with students. iMovie allows me to drag pictures into the timeline. I can then use my webcam to tape myself talking about the pictures or video clips I imported into iMovie. The picture in picture option allows me to have my video small on top of the the picture or video clip.
Drag and Drop
Once advanced tools have been enabled you can select video clips and drag them onto the timeline. For green screen, picture in picture, or other advanced features you want to drag the clip on top of another video clip. A green plus sign will signal to you that you are adding this video clip onto the current clip. Releasing the mouse will trigger the advanced options menu.