Yes, more than one way to do this.

Use track motion or cookie cutter. Track motion is easier. Put overlay picture on a timeline above your main event (video/picture), on the overlay timeline (top one), go to the track motion icon on the left of the track header (hold cursor over each icon to find it), click on track motion and adjust the event size to what you want, then move it or give it motion with the key frames. Notice that as you make it smaller your event on the bottom timeline shows. You can also reduce opacity to let the bottom event show through.

Second, use an FX called Cookie Cutter on the overlay event to cut-out shapes or pic a certain part of the overlay photo. It can size also but only uses the part of the event in the window, not the whole event (that's why track motion is a bit easier).

Which you use depends upon what you want to create. You can combine them also for good effects.

Hope this helps.

Randy