Frame Size - the real meaning

This is just the final video width and height in pixels (dots).

640x480 is roughly equivalent to NTSC Standard Definition television and 768x576 is roughly equivalent to PAL Standard Definition television. 1280x720 is 720P HD and 1920x1080 is 1080i/1080P HD

You additionally may have to specify how to adjust the aspect ratio to fit. There are 4 possible options:

1. Distort - also known as Unconstrained. This resizes the video to fill the final size regardless of the original aspect ratio. This is appropriate for converting 720x480 NTSC video or PAL 720x576 PAL video to computer square pixels. 

2. Letterbox - this will put black bars in the video to adjust the aspect ratio. This is appropriate for publishing video in a player that resizes video to fill the player screen.

3. Maintain Aspect Ratio - this will shrink one of the output dimensions so that the original aspect ratio is maintained. This is preferable to Letterbox for players that maintain aspect ratio when scaling video.

4. Crop - also known as pan & scan. This will crop off the edges of the video that won't fit in the destination. This is almost never appropriate.

I recommend you make the final video as large as practical without going larger than the original video. You gain more from the extra pixels than you lose in size.