Hi

Create a black/white image double the resolution of the video you are creating (this gives you smoother edges) as shown - this will become the alpha mask

import this image on to the timeline on a track below the background image.

Import the video on to the next free track down.

Click the imported black/white mask image, set it length as required and select Effects, Video effects, Chroma key, Alpha.

The video should now be in the background as a circle.

Note - you may have to alter the size and length of the video and the black/white image and also the direction of the alpha effect as shown by the arrow on the left of the selected clip to get what you want.

John