For purposes of editing video with Windows Live Movie Maker you have to be aware that there are two possible video screen aspect ratios: 16:9 (widescreen) or 4:3 (standard screen). If you shoot video with an HD camera (sometimes referred to as 1080p cameras or 720p cameras (don’t worry about that “p”) you will be shooting in 16:9 aspect ratio and need to set your project aspect ratio accordingly. If, on the other hand your camera is a bit older, or is a non-HD camera, then you will probably be shooting in standard screen aspect ratio, and need to set your project aspect ratio to 4:3. To set project aspect ratio, click on the Project tab and choose Widescreen (16:9) or Standard screen (4:3).
You cannot mix aspect ratios within the same project without getting either letterbox black bars top and bottom, on a standard screen project that includes widescreen video, or pillar box black bars at the sides of the video, on a widescreen project that includes standard screen video. Generally this should not be an issue, but when you assign group projects or have old video you want to include with new this may arise.
Things get a little more complicated when you start adding still images, which are shot, usually, with a 3:2 aspect ratio, but that is for another post. Cell phone video can have this same issue. There is a good and simple fix for static photos, not so much for cell phone video. Sometimes its just easier to live with black bars or borders, but we will discuss that later.
For project preparation purposes, some may find the following pixel resolution/video screen table useful. If it makes your head spin, just forget it and remember that in WLMM there are only two aspect ratios you have to worry about.
In the mean time, here is a quick screen video that demonstrates the ins and outs of widescreen vs. standard screen video aspect ratio.