Updated: 1-19-11
 

The blue editing arrow that lives in your Tool Palette Fast Menu (hamburger) by default, as well as in the Command Palette of course, is called Replace Edit, and is a pretty cool little guy. Here are some uses:

 
1 - Great for quick replacement of shots.
The Replace Edit button uses the existing In/Outs of the shot already in your sequence to figure out duration. So, all you have to do is:
A) Put the blue position indicator somewhere in the segment/shot you want to replace in your Sequence
B) Load the new shot you want to put in into the Source Monitor
C) Park the Source Window's blue position indicator in the middle of the clip (no in/out marks needed)
D) Configure your Source and Record Track Selector buttons as required to replace picture and/or audio
E) Click the blue arrow to quickly replace the shot

 
2 - The other great quality of the Replace Edit function is that IT SYNCS THINGS UP FOR YOU.
Here's the scenario: The shot in your sequence is of someone landing a punch.
You want to put a punch sound effect in. Here's a fast way to not only edit the sound effect in, but to have it be in sync on the first try:
A) In your SEQUENCE, mark in and out around the area that you want the sound effect to go.
B) In your SEQUENCE, park your blue position indicator on the first frame where the sound should occur.
C) In the SOURCE Window, park your blue line on the frame where the sound begins (no in/out needed).
** So, now you have the Blue Position Indicators telling the Avid the two points that should be aligned in sync.
D) Configure your Source and Record Track Selector buttons as required.
E) Click the blue arrow, and in goes your sound effect, and it's in sync. You can trim the in/out as needed.
** For another method of synching material, check the AVID HELP for "Sync Point Editing."
    

3 - Here's a video tutorial that demonstrates an editing approach which features using the Replace Edit function.