Sometimes when you apply a transition between two clips this warning dialog appears.
Why is this happening? To create a transition the media in the timeline has to overlap. The default transition duration is one second, so you need one second of extra media on each adjacent clip to make the overlap. If all the media for the shot is used in the Timeline there is no way to create the overlap without shorten the clips, which means shortening the project (unless they’re connected clips of course).
When you select an edit point with the backslash key (\) or with the Trim tool it will show you if there is any available media beyond what’s in the Timeline. It may not be enough for a transition, but it will indicate if there is anything.
In this shot, the clip on the right has no handles, no additional media outside of what's edited into the project to overlap with the adjacent shot.
If you double-click the edit point, or use Control-E, to open the Precision Editor you'll see that the outgoing side has a media handle that extends past the edit to create the overlap needed for the transition while the incoming side does not.
So what do I do when I get the warning? You can either accept the dialog and allow it to automatically shorten the shots, or you can adjust the edit by trimming it. It can either shorten the shot with a Ripple edit, which is what the application does automatically, or you try using the Trim tool to do a Slip edit if there is available media at the other edit of the shot.
If there isn’t available media at the other end of the shot and your really want to keep the transition point where it is, select the clip and use Control-D for the duration control in the Dashboard and type in -1. to shorten the clip by one second. You’ll then have enough room to slip the edit to create the overlap.
The best way of course is to edit your clips into the Timeline with handles, extra media available for the overlap, so you can apply a transition any time you want without the warning dialog.