They do the same thing as CD/DVD burner softwares of old: Write installation files to some external media. Setup is another step away, when you boot from said external media.
Microsoft used to offer ISO images for Windows installation, but I don't think they do that anymore. Their tool does basically the same thing except it also downloads the image for you.
Raspberry Pi has something similar for their SBCs, except they really do function like traditional software setup in their case: the media they write to is the same media the system will run off of. It's the same if you use Etcher to write their disk image file to your SD card/ USB drive instead.