Overlaying a video within a video in Photoshop

Conrad has answered your question, but I'll just add that video groups work rather like normal Photoshop layers. The groups at the top of the layers panel will appear above the groups below them.  Or you can use layer masks in an upper group to reveal the group below.

It's exactly like how still images work, and you'll have no problem getting to grips with it if you look at it like this.

Good luck

Yes. The two key things to do are for the video that you want to be in front:

A. The front video needs to be in a separate Video Group from the clip you want in the back. If the clips are in the same Video Group, they can only be one after the other. If they are currently in the same Video Group, select either clip, click the little film icon with the down arrow next to it, and choose New Video Group from Clips. Now you can drag it in the timeline so that it plays simultaneously with the other video.

B. Apply a pixel or vector mask to the front video clip or video group. This “crops” it. Now you can see both video groups.

What you see in the demo below:

1. Back video group is shown, front video group starts hidden. 

2. The front video group is shown, but it takes up the entire frame. A mask was applied to it earlier, but it’s currently disabled (red X through the mask thumbnail).

3. The layer mask is enabled by Shift-clicking it. Now you can see how it looks with the mask applied. But the layer is not in a good position, so the Move tool is used to drag it into a better position.