A transition moves a scene from one shot to the next. Generally, you use a simple cut to move from shot to shot, but in some cases you might want to transition between shots by phasing out one and phasing in another. Premiere Pro provides many transitions that you can apply to your sequence. A transition can be a subtle crossfade or a stylized effect, such as a page turn or spinning pinwheel. While you usually place a transition on a cut line between shots, you can also apply a transition to only the beginning or end of a clip.
By default, placing one clip next to another in a Timeline panel results in a cut, where the last frame of one clip is simply followed by the first frame of the next. When you want to emphasize or add a special effect to a scene change, you can add any of a variety of transitions, such as wipes, zooms, and dissolves. Apply transitions to the timeline using the Effects panel, and edit them using the Timeline and the Effect Controls panel.
Transitions are available in the Video Transitions and the Audio Transitions bins in the Effects panel. Premiere Pro provides many transitions, including dissolves, wipes, slides, and zooms. These transitions are organized in bins by type.
Kevin Monahan shows how to create new transitions based on effects in an article on the Adobe website: using effects as transitions in Adobe Premiere Pro in this blog post.