Yes, PrE has PiP (Picture in Picture), and even has some common Presets for such.
One can also create PiP in almost any desired matrix, by Keyframing the fixed Effect>Motion>Scale and Effect>Motion>Position for each Clip.
Basically, place each Video Clip on a separate Video Track, above each other, and then adjust each Clip with those Effects (Edit Effect in the Effects tab).
Good luck, and the Help file has good coverage of PiP.
So, I'm assuming it's not as simple as cs4?
I remember you just put the video on the timeline and then you just click on the video image and shrink it to what ever you want.
Well, the general operations are the same in PrE and PrPro. Actually, with the PiP Presets, it's likely easier in PrE, unless you want something that is not in the Presets, and then it's exactly the same, though the Panels look a bit different, and accessing them is slightly different.
Each uses the Clip's fixed Effect>Motion>Scale and Motion>Position. In PrPro, you just Select the Clip and open Effects Control Panel, where you have all controls. In PrE, you Select the Clip, go to the Effects tab and hit Edit Effects, with effectively opens PrE's version of Effects Control Panel.
Each offers a lot of Keyframe control, though with regards to the Velocity settings via Bezier Keyframes, PrPro has a few more options, but PrE has all that you really need for this. Also, those Bezier Keyframes are mostly for animating the Keyframes, and not for a constant PiP.
When I am doing PiP, I usually create a grid for those adjustments, so I can duplicate them at will and with repeatability. This ARTICLE will give you some tips on making and using Alignment Grids. The article is geared more towards alignment of elements in Titler (either version of Premiere), but the same applies to PiP in the Timeline. It also has links to a couple of simple grids. For PiP, I create these for my specific need, such as this:
Good luck, and hope that this helps,
Also, in each program, you can change the Keyframe display for the Clip in the Timeline, to say Scale, and this will give you a "rubberband," in the Clip for those Keyframes. One can drag that rubberband around, but I personally like to do this numerically in the Effects Control Panel/Edit Effects, as the rubberbands are not that precise. The choice is your, but make sure that you have chosen the proper Keyframe Display, or you'll be adjusting one of the other fixed Effects, like Opacity, and that is NOT what you want.
Now, in PrPro's Effects Control Panel, you can click on the Effects name in the left side of the Panel and you will get a Bounding Box in Program Monitor, where you can also adjust the Scale (or what ever Effect you have clicked on), but unless that has been added, I do not think that PrE has the Bounding Box method. Like the rubberband method, I find this to be too imprecise, and do not use it either.