Apple Final Cut Pro 5 - Manual (Page 445)

110 Part II Rough Editing
When No Sequence In or Out Points Are Set
If you don’t set any In or Out points in the Canvas or Timeline, Final Cut Pro uses the
playhead as an In point to determine the outcome of your edit.
The position of the playhead
determines the In point if you
haven’t set any edit points in
the Canvas or Timeline.
After the edit, the
playhead moves to
the end of the clip. The new clip starts
where the playhead
was prior to the edit.