Not quite, Ed...Originally Posted by Ed Sukach
The theory is that light moves only in straight lines through air - excepting diffraction. so a light ray from upper left would hit the lower right corner of the film, and nothing else. Moving the pinhole in and out affects only the effective focal length (and thus aperture), not focus.
Diffraction is what kills sharpness in pinhole photography, otherwise a smaller hole would always give sharper pictures.