The default behavior for an iframe-based canvas page is for it to be "smartsized", in which the iframe fits the remaining space on the page. This option does not allow the application itself to control or change the size of the iframe. For example, the smartsize attribute does not help an application that wants the canvas page to fit the content of iframe when the size of the content itself is not fixed.
You can see a demo of an iframe-based application using this feature at this link. You can learn more about this feature on the Facebook Developers Wiki at http://wiki.developers.facebook.com/index.php/Resizable_IFrame.