First of all: This is no documented 'feature' of iMovie, it is a workaround! For instance, you will probably notice some stutter or no playback at all of the inserted graphic in iMovie; in the exported movie, your graphic will appear flawless. And you can apply only one graphic per clip - if you need more, split the clip or create a graphic containing all elements,
// Read the updates for iMovie vers. 10 aka 'iMovie13' down below //
In iMovie11's Preferences, switch on 'Show Advanced Tools'
In the Project Properties, set 'Initial Photo Placement' to Crop
Creating a Pointer/Circle/Title
I prefer to use a designed paint-tool such as Pixelmator; for sure, you can use any other 'paint'-app, which supports transparency.
In my painting app, I'm creating a new document.
HINT: this document has to have the same aspect-ratio as your video; 'widescreen' is 16:9, standard is 4:3.
recommendation: choose your videos resolution, such as 1280x720. dpi is of no use in video.
as you notice in the screen-shot, I'm starting with an empty, transparent background (indicated by the checkerboard) - we had reports, adding transparency later by selecting/erasing a background can cause 'borders' by undefined selection.
best practice: paint on transparency!
Save as .png
HINT: only png (or tiff) preserves transparency! As a jpg, the transparent background will immediately get solid white.
Creating a pointer without additional software
You can 'abuse' your Mac's pre-installed Preview.app as a painting tool:
open any picture with the correct aspect-ratio, here: a screen-shot of a video, select all (cmd-A) and hit delete/backspace.
Now, the frame is 'empty', ready for painting.
Use the annotation tools of Preview (click the little stencil in the menu-bar, select circle/arrow/box/text) to create your graphic.
Save that new graphic as .png
Add, size and place graphic
Drag the .png from its Finder location onto the clip in the project.
Releasing the mouse will offer you a context-menu, choose 'Picture in Picture'
You're now allowed to move, size and place your graphic wherever you want it - well, not exactly: there's some limit in size, a full-screen is not optional (example: to create a key-hole effect)
that same trick, using a transparent.png allows many other 'effects': think of speech-bubbles, a 'censored'-bar or customised titles as in this example:
update, for usage in iMovie vers.10:
There's no manual switch for 'Advanced Tools' anymore - all its features are avail by default.
Just drag 'n drop/import your overlay into your Project onto the clip you like to highlight.
Be sure, your Video-Overlay settings are set to 'Pic-in-Pic', by default it is set to 'Cut away'
Be sure, your overlay graphic has an aspect ratio of 16:9 - otherwise iMovie will cut-off parts of it.
Be sure your overlay graphic is saved as 'png', to keep transparencies.
In iMovie vers. 10 you can apply several Pic-in-Pics over a single clip.
You can stretch a Pic-in-Pic to 'full screen'; this allows to create a 'dim effect' by adding a (here: 75%) opaque grey in your overlay graphic:
And, no, you can NOT animate nor 'track' such a pointer in iMovie.
Enjoy movie making!