The Zoom button resizes the window to ensure the best display (i.e. your own or the app default). It's one of the things I would really, really like to see implemented in Metacity (or any other Linux WM) but still no dice, everyone's fond of the stupid maximized with loads of whitespace windows by default.

See more here: http://developer.apple.com/documentation/UserExperience/Conceptual/OSXHIGuidelines/XHIGWindows/chapter_17_section_4.html#//apple_ref/doc/uid/20000961-BACEDHFG