The key thing to remember with picture-in-picture is that the images need placed correctly in the tracks, as they are layered...

This of the Timeline mode as a building with floors. Track 1 would be the first floor, and all other tracks would stack on top... this is key because your first image loaded the background needs to be on a lower track than the overlayed picture in picture.

So, for my example load the background image (this can be a photo or video) in the timeline mode onto track 1 - This is the base track image... we will not bring in the second image on track two, where they are stacked on top of each other.

now, we need to size and position the second image, so make sure it is selected to where it is highlighted orange and then go to the effects tab, in effects look for Movement effects and then select size/position, here you will notice that the preview monitor will now have these orange handles on them, if you were to left mouse click a corner orange handle then hold and drag, you will see you are making that second image smaller. If you left mouse click in the center area of the image, hold and drag, you can position the image into the location you desire.

When you have done this once, you can see how simple it actually is... I guarantee it will take longer to read what I typed here then actually doing a picture-in-picture effect.

But wait... there is more

If you needed this overlay image to fit something at an angle, go back to movement effects, look for 3D distortion, same handle orientation but now when you take a corner, you can move that corner independent of the rest of the image, thus you can angle the image within the background.

Hope that is helpful