Optimize Video, Full (Original Size) - What Does It Do?

I've recently noticed that some of the video I've imported into iMovie '09 is "optimized" and some isn't. What's the difference?
Specifically, what does the action "Optimize Video - Full (Original Size)" actually do? If the video can already play in iMovie, and is clearly compatible with it, why does it need optimizing?
Once you optimize a video, you can't de-optimize it, right? It's a one-way street.

There is an advantage to having the optimized video: At least on my computer, it plays significantly more smoothly, and it scrubs better, too. Here's what I found for an 8.1 s clip from my iPhone 4:
Original file: 10.5 MB, 95% CPU when playing.
Optimized Large: 37.6 MB, 51% CPU
Optimized Full: 56.9 MB, 47% CPU
With the original file, the viewer is jerky when it's playing, and the red scrub bar has trouble keeping up with the mouse. With the two optimized, the viewer is smoother (but not perfect), and the scrub bar keeps up with the mouse pretty well.
I don't understand why the original is so jerky in iMovie when it plays perfectly in QuickTime. I've always had problems with jerky video in iMovie.
I will also mention another point of interest: I have compared video from my iPhone 4 with video from my Sony HDR-HC5 HDV video camera, a pretty decent HD camera that records on mini-DV tapes. I was surprised to find that the iPhone video is markedly sharper. It really looks significantly better. I will probably be taking more video using my phone now, instead of always lugging around the video camera.
Downsides to the iPhone video: Not as good in low light. Terrible orange hue in incandescent light (some posters have claimed this might be a defect, as not all phones seem to have this). "Rolling shutter" artifacts. Hard to hold steady, and worries about dropping it since it has to be held in an awkward way.
Still, it'll be great to always have a high-quality (in outdoor light, at least) video camera close at hand.

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