Movie mode and game mode
In the SFM, you can be in one of two modes: movie mode or game mode. You record in game mode; you modify that recording in movie mode. (You will probably spend most of your time in movie mode.) You can toggle game mode on and off with.
In game mode, you can do anything you could normally do in that game: fire a weapon, switch weapons, take damage, kill an enemy, move around with WASD, interact with the environment and other players, and so on.
When you toggle game mode on, your player character will start out at a player spawn point. You can run through the map to the place where you want to record your gameplay, or, in movie mode, you can teleport the player to the viewport's camera by right-clicking in the viewport, clicking Game, and clicking Teleport Player to Camera.
When you have your player character in position, you're ready to record gameplay.