The Fusion Drive combines two physical storage devices into a single volume. The size of that volume is the sum of the capacities of the devices. So for example, if the SSD has a capacity of 256 GB and the HDD has 1 TB, the FD will have a capacity of about 1.25 TB.
FD adaptively moves data between the devices so that the most often accessed files (actually blocks) are on the SSD.
How well it performs relative to an SSD will depend on you usage pattern. In my tests, I get about 90% of file accesses to the SSD.
One drawback of FD is that there are two points of failure instead of one. If either device fails, the whole volume is lost.