Hi,

Here is a good definition of Chroma key and how to use it.  http://en.wikipedia.org/wiki/Chroma_key

Basically you take one image filmed on blue or green screen background, use chroma key to remove the background and insert that image into another.  Here is a example I made using chroma key.  the girl dancing was filmed with a greenscreen background. 

It is also used with alpha channel effects which are usually created with a pure black or pure white background. So you use chroma key to remove the background and superimpose the effect on the video.

Good Luck