Transaction Handling in pl/pgsql

Hi

I am trying to get a better understanding of how transactions work in
pl/pgsql functions. I found the following text in the help:
"It is important not to confuse the use of BEGIN/END for grouping statements
in PL/pgSQL with the database commands for transaction control. PL/pgSQL's
BEGIN/END are only for grouping; they do not start or end a transaction"
but I am still a bit confused.

Suppose I have a function that will be called from an application. Will all
the statements in the function be rolled back if the last one generates an
exception? or do I need to add code to a function to make that happen?

Thanks
Craig