It's a common misconception that the green button seated among its red and yellow companions is the Full Screen button. As you've noticed, in some cases it may be (though not in the Lion sense of taking over the entire screen and creating a separate Mission Control environment but rather in causing a window to fill the screen), in others, it expands the window in one way or another. In one isolated instance it minimizes a window and shows a set of mini controls.

We'll start with Finder windows. How the window expands depends on the number of items in it. If you're dealing with a window in Icon view that has just a handful of items in it, clicking the green button will expand the window so that you can see all the items in it. If you're in List view, the window will expand not only to show the items in it, but also stretch sideways to display all the columns within that window. (CoverFlow works similarly.) In Column view the window will expand to show you as much of the visible hierarchy as it can.

If a window has more items than can be displayed, the window will expand up and down as far as it can manage. In Icon view the window will cycle through different expansion views, eventually getting to a full-screen view. Clicking the button while in List view never fills the screen.

If you hold down the Option key while clicking the green button, any open windows will expand, not just the currently selected window. This works in applications as well.