Apple Final Cut Pro 6 - Manual (Page 442)

Chapter 7 Setting Edit Points for Clips and Sequences 109
II
 If you set a sequence Out point, the Out point of the source clip is placed at the
sequence Out point, and the clip is “backtimed” for the duration of the source clip,
extending from the Out point to the left.
Out point
The new clip ends at the
Out point that you set.