I hope the following sequence of code will help you:
Bitmap targetBitmap = Bitmap.createBitmap(targetWidth, targetHeight, config);
Canvas canvas = new Canvas(targetBitmap);
Matrix matrix = new Matrix();
matrix.setRotate(mRotation,source.getWidth()/2,source.getHeight()/2);
canvas.drawBitmap(source, matrix, new Paint());
If you check the following method from ~frameworks\base\graphics\java\android\graphics\Bitmap.java
public static Bitmap createBitmap(Bitmap source, int x, int y, int width, int height,
Matrix m, boolean filter)
this would explain what it does with rotation and translate.