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Think of a Sequence as a "mini-Project," within the umbrella of a Project. As of CS4, these can differ within the same Project with their Presets.
I use Sequences to edit my "scenes, or chapters," so that my Project is broken up in that fashion. I keep that same "Sequence/scene/chapter" structure through to Encore, to author my Project. Others use Sequences to handle dissimilar footage, and for other workflows.
Thanks Bill. I have never used any of the premier pro series... and this is my first project.
You are most welcome.
Now, I just barely scratched the surface on Sequences. There is so much more to them, and Colin's link should get you much more background, and many more details on what they can, or perhaps cannot be.
Another explanation beyond the useful ones that you've gotten so far:
A sequence is the basic framework of the movie that you're making. Each sequence is a movie, and it's made up of video and audio items (tracks) that are made up of pieces of footage items (clips).
You can have lots of sequences within a project, and you can nest sequences within one another---so that your big movie can be made up of smaller movies that you've made.
I recommend that you read this overview, which defines a few terms and gives an idea of how things fit together: