Isothermal crystallization of supercooled liquid and glassy Fe thin films has been studied via molecular dynamics (MD) simulations with a many-body potential of the embedded atom method (EAM). Supercooled liquid and glassy Fe thin films are obtained by cooling from the melts. Models at a given temperature are annealed for a long time in order to study crystallization process. Time dependence of various thermodynamic and structural quantities upon annealing is analyzed including potential energy, radial distribution function (RDF), coordination number distribution, fraction of atoms of various crystalline orders etc. We find that crystallization of supercooled liquid and glassy states exhibits a first-order behavior. Time?temperature-transformation (TTT) diagram is found for a wide temperature range from a supercooled liquid to a deeply glassy state and it exhibits a nose shape like that commonly found. Atomic mechanism of crystallization is studied in details via analysis of the spatio-temporal arrangements of crystalline atoms occurred during annealing and we find a quite new scenario of crystallization unlike that thought in the past. Crystalline atoms have a tendency to form clusters including a single extra-large percolation one. Crystalline phase is formed via enhancement of atomic population of the single largest percolation cluster by attachment of smaller clusters and newly formed crystalline atoms upon further annealing. We find that only one third of the ?naturally quenched-in? crystalline atoms remains stable and participates in the crystallization process. Free surface effects on structure and crystallization is also found and discussed.