In the pathfinder Panel there are two rows of icons. The first row of icons (Shape Modes) creates compound shapes while the second row creates similar results but it focuses mainly on the paths themselves rather than the produced shape.
Add to shape area
Draw two shapes.
Choose both the shapes and click on this button. The result you will get is a combination of these two shapes.
The combined shape will have a yellow fill, since the order of the shapes is important while performing the pathfinder operations. Attributes of the top shape will be used by Illustrator for the combined result properties. Using the direct selection tool you can make adjustments to each of the two shapes. For example, try moving the lower right rectangle further to the right as seen below.
Choose the shapes and click on the Expand button on the Pathfinder Panel.
Now you have ONE FINAL shape for further actions. If you want to add the two shapes and expand to one final shape in one step, then press and hold the ALT key and click on the add button.
Subtract from Shape Area
Again go back to the initial shapes.
Choose both the shapes and click on the Subtract button to subtract the top most shape from what lies beneath it. You will get the following result.
You can adjust the appearance of the shape by editing each one of the components separately. Using the direct selection tool move the subtracted shape diagonally towards the upper left corner.
Click on Expand and you will get the final ONE shape.
Intersect shape areas
Choose the two rectangles again, and click on Intersect. We will get a compound shape that is only the Intersecting area of the two rectangles. Click on Expand and you will get a small yellow rectangle.
Exclude overlapping shape areas
Click on the exclude button, and then we will get the inverse result. We have a shape with an empty area. This area is the overlapping area of both rectangles.
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