Whatever you do with a clip on the timeline it will still remain the original heigth and width.
If your timeline is 1920 x 1080 and your clip is 1080x720 it will scale it up to 1920x1080 but the original will still be 1080x720.
However you will lose quality. It is less sharp.
so If the clip is bigger than the timeline, and you scale to fit, meaning, it makes the image smaller so you can see all of it, it doesnt lose image quality correct?
It is a bit more complicated than that.
If you use the Scale to Fit you lose the pixels you are not seeing. So if you want to scale it up a little larger, like almost back up to the size it was before, you are going above 100% of the "new" image that was scaled down, and therefore you will have less of a quality image.
If you use the Motion effect's "Scale" parameter, you do not throw away the unused pixels so you can scale it back up to 100% without a loss of quality.
Therefore, if you plan on panning around the image, like Ken Burns, you want to use the Motion effect.
If you just want to use it at the new smaller size, then you are no t going to lose much visual quality either way, but keep in mind that there are less pixels and therefore the picture will not be the same. If it was vibrant and exiting at full size, it may not be quite so stunning at a smaller size.
The short answer is that any time you change the size of an image, you will lose a little quality. It could be so small that no one would ever notice. The best thing is to just do what you need to do and obverse the results. Is it good enough for your needs? If not, report back and tell us exactly what you did. Maybe we can help it come out better.