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On an iMac running Mac OS X version 10.7.5 I have accidentally resized Terminal.app to full-screen (272 x 76) and am unable to resize Terminal.app to a smaller size. How do I resize Terminal.app to the factory default size or a size where I can use the mouse to resize Terminal.app?

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You have (at least) wo possibilities:

1) You could click on the zoom button to revert the zoom effect (the green circle in the upper left corner in the image below: enter image description here

2) You can enter smaller values for the window size under "Preferences": enter image description here

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