Finalize will "render" your project in all available sizes and place a copy in the Media Browser so you can use them in GarageBand, iDVD, Keynote, Pages, Word, Powerpoint, etc. without having to wait for the to render.
It does the same thing as using the SHARE menu, but with the SHARE menu, you have more control over which sizes are created.
An iMovie Project is really a list of commands for how to process your video. For example, "go get this clip from this event, and start at frame 5 and continue to frame 300." "Add this title here". "Start the music at frame 23 of this clip". It might be thousands of entries, but it is basically a text file giving instructions on how to take your event clips, photos, and music and assemble them into a movie. When you Finalize, or Share, you are telling iMovie to execute these instructions and create a final movie.
When you finalize, it creates copies of your movie. They are located in the Project file, so they can be used in other apps. For example, if you have Finalized a movie, a copy will be in the project file. If you click SHARE/TO iTUNES, it will copy the file from the project file into iTunes, so it happens very quickly. If there was no copy in the project file, it would render the movie and then put a copy in iTunes.
It is not recommended to tinker around in the Project file, because you risk making your project unusable, but if you want to see what is going on, you can right-click on your project file in the Finder and select "Show Package Contents". The Media Browser movies will be in the folder called Movies within the project package.
*** John Cogdell beat me by three minutes - lol***
