Basically, you use "Prepare for transition" first, then you make changes on the screen...such as transfer the player to a different map or move an event's location or something. Once the changes have theoretically been made (but the player won't see them), you use Execute Transition. Now, using the transitional image, it will transition from the frame before "prepare for transition" to the new one. So it's kind of like you secretly do things behind the scenes when the player can't see and then ta da!! Like a magic trick!
If you do transfer the player somewhere else, I think you need to set Fade Off...I think it causes problems for transitions if I remember right.