Alright, there are a few ways to accomplish it. The functionality is commonly referred to as PIP or "Picture in Picture".
In that past, I've used iMovie for it and a long long time ago, I downloaded some special utility to do it with an old version of WMM. A lot of people use Sony Vegas and I'm thinking of changing over to it... if I don't get a mac as our next production machine.
For iMovie, basically you can drag the clip onto another clip and it gives you the option. A trick I've seen is that you first publish the movie as a black screen then add a pip box and publish. After that you add the movie back to imovie and add another box and repeat. Basically you add one box at a time until you achieve the results you want. I hear that Sony Vegas is much better.