Tom,
I had to have someone point it out to me too, I was used to having access to a separate fade out/in transition and a separate dissolve from one scene to another.
If you haven't already, find the transition in the transition "room" labelled simply "fade" and drop it between 2 video clips. Play back both clips insuring you have the "movie" button under the preview window highlighted.
Notice how one video clip dissolves into the next.
Now go to the media room and select "color boards", drag the black one down to the timeline between the same 2 video clips. When you play this the first scene plays, cuts directly to solid black then cuts directly to the second scene.
Now stretch the black color board out a bit or change the duration until you have 5 or 6 seconds worth and drop that same fade in at it's start and at it's end. Play this and what you should see is the first scene fades out to total black. Total black plays a few seconds and then the second scene fades in from black.
A fade to black can have an air of "finality" about it depending on content of the sequence before it. Or it can merely indicate the end of a "chapter like" part of a story. Fade to black often suggests a passage of time.
Now do the same thing with a white color board and notice the different feel to it. I've seen it used in films where it suggested a transition to "Heaven".
Try it with a red color board and imagine a transition in a horror story.
The fade used as a dissolve between clips from different locations can suggest a change of location.
The two transition effects I use the most (almost exclusively) in my work are the fade to black and the cross dissolve, and in PD7 these are both accomplished with the fade.
Hope I've helped you some here.