Java's return value in try-catch-finally mechanism

I have just encountered this following code:

public class TestFinally {
    public static void main(String[] args) {
        int returnValue = function();

        System.out.println("Return value: " + returnValue);
    }

    public static int function() {
        try {
            return 1;
        } catch (Exception e){
            return 2;
        } finally{
            return 3;
        }
    }
}

It is without a doubt that running this code will yield an output of "Return value: 3".

However, I am curious as to:

1. The mechanism of the innards in the JVM. Does anyone know if the VM actually replaces the return value on the stack by over-writing the first "return 1"? If so, where can I find more information on this.
2. I have yet to find the use for a return in the finally mechanism that is used this way and allowed in the implemented in the JVM. If this code construct is used as a means to return error code, it is in my opinion there are better ways to log errors or return these error codes. Has anyone found a use for such a construct?

Many thanks in advance.

Cheers, Vern