Step 1) Add media to the Timeline
The first step in creating the picture-in-picture effect is to add media to the video tracks in the Timeline. When you add media into the Video 1 and Video 2 tracks, place your clips according to how you want them displayed. The clip in the track above is the clip that will be visible in the preview window.
Step 2) Resize and reposition
Once you've placed your media on the Timeline, open the clip editor to adjust the scale and position of the clip. For more details on how to adjust the size and position of a clip, you can refer to this page.
Step 3) Additional tracks
If you would like to add more video tracks to stack the picture-in-picture effect multiple times, you can select the + icon on the left side of the Timeline.
You will be prompted to select the type of track you wish to add.
When you begin to add multiple video tracks, you'll notice that there is a sandwich effect in the preview. Each track acts as a layer in the sandwich, and whichever clip is on top in the Timeline is what will be on top in the preview.
The clip in the Video 2 track is on top of the clip in the Video 1 track, but below the clip in the Video 3 track.
If you really want to get creative, you can adjust the opacity of the clip while creating the picture-in-picture effect!