Hi Michael,
Chris is correct in his description, and this is the best way to get shapes to align to your terrain.
The Align Shapes to terrain function documentation however has several options which are described here.
Once you align shapes, often depending on the method you select you still might need to make changes to the terrain so that it matches your shapes. The way to do this is the Align Terrain to Shapes Function. This also has useful attributes in that will till you how much Cut and Fill was required to changed the terrain to match that of the shape at its current alignment (if it is relevant for your project).
Hope this is helpful.
David
David Wasserman, AICP