I'm having trouble understanding featured image

I have done a lot of reading, but I’m still having trouble understanding featured image and using it properly. I understand that a featured image can be associated with a post, and used as a thumbnail, but I’m trying to get a more complete understanding. It would really be helpful if someone could answer these questions please:

1. Sometimes featured images are used as a large image at the top of a post. Does the theme decide whether this will occur or not? Can I change this, in which case what code needs to be changed?

2. Can the thumbnails be any size that is set by the theme? What code determines this? Presumably I can change the code to any reasonable size?

3. If a large featured image is set, WordPress has to crop to show the image as a thumbnail. Does this occur when the image is first loaded, and the thumbnail stored separately, or is it done on the fly as the page is loaded?

4. I have seen somewhere code that has several different sizes of featured image in one theme? Where would this be useful?

Thanks for your help.