The fetchType attribute controls whether the annotated field is fetched immediately when the primary entity is fetched. It does not necessarily dictate how the fetch statement is constructed, the actual sql implementation depends on the provider you are using toplink/hibernate etc.
If you set fetchType=EAGER
This means that the annotated field is populated with its values at the same time as the other fields in the entity. So if you open an entitymanager retrieve your person objects and then close the entitymanager, subsequently doing a person.address will not result in a lazy load exception being thrown.
If you set fetchType=LAZY
the field is only populated when it is accessed. If you have closed the entitymanager by then a lazy load exception will be thrown if you do a person.address. To load the field you need to put the entity back into an entitymangers context with em.merge(), then do the field access and then close the entitymanager.
You might want lazy loading when constructing a customer class with a collection for customer orders. If you retrieved every order for a customer when you wanted to get a customer list this may be a expensive database operation when you only looking for customer name and contact details. Best to leave the db access till later.
For the second part of the question - how to get hibernate to generate optimised SQL?
Hibernate should allow you to provide hints as to how to construct the most efficient query but I suspect there is something wrong with your table construction. Is the relationship established in the tables? Hibernate may have decided that a simple query will be quicker than a join especially if indexes etc are missing.