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I came across a new VLC bug recently that appears to not yet be documented anywhere, so the intention is to put the temporary fix here so that people may solve their problem.
You have to windows, one with the VLC controls in and one with the video being rendered. For me this occurs randomly and is not due to some button being pressed.
VLC render window
NOTE: Both of these windows are displayed separately when this bug presents itself.
VLC controls window
Checking out the settings, there is no way to bring these windows back together. A check online didn't show up any solutions either.
I believe the issue is that for some reason the settings are becoming corrupted. VLC then defaults to this mode for displaying (which is apparently the default).
Select Tools > Preferences
in the VLC decorated window, then click Reset Preferenecs
.
VLC settings window
You will then need to restart VLC to see the render window correctly placed inside the control window. You may find that the same video triggers the same behaviour to occur again, so you may need to open a different video in order to confirm the reset.