  We develop a fully vectorial and non-paraxial formalism to describe
spontaneous parametric down-conversion in nonlinear thin films. The formalism
is capable of treating slabs with a sub-wavelength thickness, describe the
associated Fabry-P\'erot effects, and even treat absorptive nonlinear
materials. With this formalism, we perform an in-depth study of the dynamics of
entangled photon-pair generation in nonlinear thin films, to provide a needed
theoretical understanding for such systems that have recently attracted much
experimental attention as sources of photon pairs. As an important example, we
study the far-field radiation properties of photon pairs generated from a
high-refractive-index nonlinear thin-film with Zinc-Blende structure, that is
deposited on a linear low-refractive-index substrate. In particular, we study
the thickness-dependent effect of Fabry-P\'erot interferences on the far-field
radiation pattern of the photon pairs. We also pay special attention to study
of entanglement generation, and find the conditions under which maximally
polarization-entangled photon pairs can be generated and detected in such
nonlinear thin-films.
